Government gives option to calculate long-term capital gains tax on properties, pay lower tax  

New Delhi, August 6

After uproar over removal of indexation benefits on sale of properties, the government on Tuesday proposed amendments to the Finance Bill 2024 with an aim to provide relief to taxpayers who bought properties before July 23, 2024 by giving them the option to choose between two tax rates for long-term capital gains (LTCG) tax.

As per the amendments circulated among MPs on Tuesday night, the individuals will have the option to either pay 12.5 % long term capital gain on sale of property without indexation benefit or pay 20 % tax with indexation benefit as per the old system whichever is lower.

"In the case of transfer of a long-term capital asset, being land or building or both, by an individual or HuF (Hindu undivided families) which is acquired before the 23rd day of July 2024, the taxpayer can compute his taxes under the new scheme [@12.5% without indexation] and old scheme [@20% with indexation] and pay such tax which is lower of the two," the amendment moved by Finance minister Nirmala Sitharaman says.

The union budget 2024-25 had proposed lowering the LTCG from 20 per cent to 12.5 per cent but removed the indexation benefits. The new rates came into effect from July 23, 2024.

The indexation benefit allowed taxpayers to compute gains arising out of the sale of capital assets after adjusting for inflation.

The budget proposal was criticised for potential to raise tax burden on the middle class.