<p>New Delhi: The changes introduced in the Union Budget 2024-25 to the taxation of short and long-term capital gains arising from the sale of property would impact only a small section of rich people carrying out high value property transactions, while it will be beneficial in majority of the cases and bring simplicity, central government sources said on Wednesday.</p><p>In the Union Budget presented on July 23, Finance Minister Nirmala Sitharaman announced major changes in capital gains taxation. Long-term capital gains tax on sale of property has been reduced to 12.5% from 20%, but indexation benefit, which allowed property owners to adjust their purchase price for inflation, has been removed. In some cases, long-term capital gains tax has been increased from 10% to 12.5%.</p><p>Nominal real estate returns are generally in the range of 12-16% per annum, much higher than inflation. The indexation for inflation is in the region of 4-5%, depending on the period of holding. “Therefore, substantial tax savings are expected to a vast majority of such taxpayers,” a top official, who spoke on condition of anonymity, said.</p>.Union Budget 2024 | Budget proposals for critical minerals, energy transition to push net-zero goals: Energy players.<p>The source further added that the new tax rate without indexation is beneficial in most cases. For property held for 5 years, the new regime is beneficial when property has appreciated 1.7 times or more. For property held for 10 years, it is beneficial when the value has increased to 2.4 times or more. For property purchased in 2009-10, if value has increased to 4.9 times, the new tax rate of 12.5% without indexation is beneficial for the property sellers.</p><p>However, if the return on the sale of property is less than 9-11% per annum, the tax burden will rise under the new tax system. Exemption limit on long-term capital gains for certain financial assets has been increased to Rs 1.25 lakh from earlier Rs 1 lakh per year.</p><p>Further the investment of capital gain in 54EC bonds up to Rs 50 lakh or in buying or constructing houses up to Rs 10 crore, the capital gain is exempt from tax, subject to certain specified conditions.</p>.Union Budget 2024 |Cut in customs duty, credit guarantee scheme for MSMEs to help boost manufacturing, exports: Experts.<p>Due to these two provisions the majority of property sellers are shielded from paying taxes. “This increase will impact mostly the rich,” the source said.</p><p>Another important feature of the new tax system is simplification in the taxation system. Suppose, if a property is bought in 2011-12 for Rs 20 lakh and sold for Rs 80 lakh in 2022-23, the profit of Rs 60 lakh used to be adjusted for inflation, using the Cost Inflation Index issued by the Income Tax Department. That process has now been done away with.</p><p>“Simplification of any tax structure has benefits of ease of compliance like computation filing and maintenance of records,” the source said.</p>
<p>New Delhi: The changes introduced in the Union Budget 2024-25 to the taxation of short and long-term capital gains arising from the sale of property would impact only a small section of rich people carrying out high value property transactions, while it will be beneficial in majority of the cases and bring simplicity, central government sources said on Wednesday.</p><p>In the Union Budget presented on July 23, Finance Minister Nirmala Sitharaman announced major changes in capital gains taxation. Long-term capital gains tax on sale of property has been reduced to 12.5% from 20%, but indexation benefit, which allowed property owners to adjust their purchase price for inflation, has been removed. In some cases, long-term capital gains tax has been increased from 10% to 12.5%.</p><p>Nominal real estate returns are generally in the range of 12-16% per annum, much higher than inflation. The indexation for inflation is in the region of 4-5%, depending on the period of holding. “Therefore, substantial tax savings are expected to a vast majority of such taxpayers,” a top official, who spoke on condition of anonymity, said.</p>.Union Budget 2024 | Budget proposals for critical minerals, energy transition to push net-zero goals: Energy players.<p>The source further added that the new tax rate without indexation is beneficial in most cases. For property held for 5 years, the new regime is beneficial when property has appreciated 1.7 times or more. For property held for 10 years, it is beneficial when the value has increased to 2.4 times or more. For property purchased in 2009-10, if value has increased to 4.9 times, the new tax rate of 12.5% without indexation is beneficial for the property sellers.</p><p>However, if the return on the sale of property is less than 9-11% per annum, the tax burden will rise under the new tax system. Exemption limit on long-term capital gains for certain financial assets has been increased to Rs 1.25 lakh from earlier Rs 1 lakh per year.</p><p>Further the investment of capital gain in 54EC bonds up to Rs 50 lakh or in buying or constructing houses up to Rs 10 crore, the capital gain is exempt from tax, subject to certain specified conditions.</p>.Union Budget 2024 |Cut in customs duty, credit guarantee scheme for MSMEs to help boost manufacturing, exports: Experts.<p>Due to these two provisions the majority of property sellers are shielded from paying taxes. “This increase will impact mostly the rich,” the source said.</p><p>Another important feature of the new tax system is simplification in the taxation system. Suppose, if a property is bought in 2011-12 for Rs 20 lakh and sold for Rs 80 lakh in 2022-23, the profit of Rs 60 lakh used to be adjusted for inflation, using the Cost Inflation Index issued by the Income Tax Department. That process has now been done away with.</p><p>“Simplification of any tax structure has benefits of ease of compliance like computation filing and maintenance of records,” the source said.</p>