Finance Minister Nirmala Sitharaman announced a reduction in the tax rate on long-term capital gains, lowering it from 20% with indexation benefits to 12.5% without indexation benefits. An amendment to The Finance Bill, 2024, has been proposed, as detailed in a circular shared with Lok Sabha members. This amendment will allow taxpayers to choose the more favorable of these two tax rates for transactions involving the transfer of immovable assets, such as land and buildings, acquired before July 23 of this year.
This change offers substantial relief on long-term capital gains for immovable property. The flexibility provided in the grandfathering provision applies to all property transactions finalized before the Budget’s presentation on July 23.
Updated Tax Regulations 2024
In the Union Budget 2024, Finance Minister Nirmala Sitharaman announced that for long-term capital assets like land or buildings acquired before July 23, 2024, taxpayers can choose to calculate their taxes under the new scheme (12.5% without indexation) or the old scheme (20% with indexation), paying whichever is lower. This change removes indexation benefits for real estate transactions and reduces the LTCG tax from 20% to 12.5%.
The updated regulations, effective July 23, 2024, maintain indexation benefits for properties acquired before 2001, while only recent acquisitions are subject to the new rules. Transactions completed before this date remain unaffected. Previously, indexation benefits helped homeowners reduce taxable profits by adjusting property costs for inflation. In the recent Union Budget, Finance Minister Nirmala Sitharaman introduced key changes, including an increased Standard Deduction of Rs 75,000 and revised tax slabs.
Additionally, the securities transaction tax (STT) for futures and options was raised. The rate for the sale of options in securities increased from 0.0625% to 0.1% of the option premium, while the rate for futures rose from 0.0125% to 0.02%.
One of the key changes was the adjustment in the capital gains tax for shares and stocks, which increased from 10% to 12.5%. This increase results in a 2.5% reduction in post-tax returns.
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