The government has given relief to the taxpayers, the benefit of indexation on properties has been retained, which will benefit

Long Term Capital Gains Tax on Property: There is good news for property owners. The government has announced relaxation in long term capital gain tax rules. In the Union Budget on July 23, Finance Minister Nirmala Sitharaman changed the rules for long term capital gain tax on property. Long term capital gain tax was reduced from 20 percent to 12.5 percent. But the benefit of indexation was removed. This change caused disappointment in the real estate sector.

Taxpayers will get the option of indexation

The government had said on August 6 that taxpayers will now have the option to choose between 12.5 percent and 20 percent tax rates on long-term capital gains tax. If a taxpayer wants indexation benefit, he will have to pay 20 percent long term capital gains tax. If a person does not want to take indexation benefit, he will have to pay 12.5 percent tax on long term capital gains. Taxpayers will get this option only in case of property sold before July 23.

Relief only for those who sell property before 23 July

The relaxation of long-term capital gains tax rules on properties by the government will provide relief to real estate companies. This will also benefit many property owners who have received long-term capital gains on selling their properties before July 23. Now they will have the option to pay tax with and without indexation.

What is indexation benefit?

Due to indexation benefit the purchase price of the property increases. Actually, under indexation the purchase price of the property is adjusted with inflation, suppose you bought a property for Rs. 10 lakhs. It was sold for Rs. 20 lakhs on July 1. In which the long term capital gain is Rs. 10 lakhs. But due to the benefit of indexation there is a capital gain of Rs. 6 lakhs. So now you have to pay 20 percent tax on six lakhs. Apart from indexation you will have to pay 12.5 percent tax on capital gain of only Rs 10 lakhs.