Understanding Long-Term Capital Gains Tax on Real Estate: Clarification on Acquisition Cost
The I-T department has provided clarity on the acquisition cost of real estate properties purchased before 2001 for LTCG calculations, which is now taxed at 12.5%.
Long Term Capital GainsReal EstateIncome TaxIndiaTax CalculationReal EstateJul 26, 2024
For properties purchased before 2001, taxpayers can choose between the actual cost of acquisition and the fair market value as of April 1, 2001, as the base for calculating LTCG. The indexed price will then be subtracted from the sale price to arrive at the taxable LTCG. The I-T department has provided an example to illustrate this calculation. Suppose a property was purchased in 1990 for Rs 5 lakh, and its stamp duty value as of April 1, 2001, was Rs 10 lakh, with an FMV of Rs 12 lakh. If the property is sold on or after July 23, 2024, for Rs 1 crore, the cost of acquisition as of April 1, 2001, would be Rs 10 lakh (lower of stamp duty or FMV). The indexed cost of acquisition in the 2024-25 fiscal year would be Rs 36.3 lakh (Rs 10 lakh 363/100). The LTCG would be Rs 63.7 lakh (Rs 1 crore minus Rs 36.3 lakh), attracting a tax of Rs 12.74 lakh at a rate of 20%.
The Income Tax department is responsible for collecting taxes and enforcing tax laws in India. It provides guidance and clarification on tax-related matters to facilitate compliance and promote transparency.
The Income Tax department is a government agency responsible for direct taxation in India. It is responsible for collecting taxes, enforcing tax laws, and providing guidance on tax-related matters.
Frequently Asked Questions
What is the cost of acquisition of real estate properties purchased before 2001?
The cost of acquisition is the fair market value (FMV) as of April 1, 2001, or the actual cost of the land or building.
How is LTCG calculated for properties purchased before 2001?
LTCG is calculated by subtracting the indexed cost of acquisition from the sale price of the property.
What is the tax rate for LTCG on real estate in FY25?
The tax rate for LTCG on real estate in FY25 is 12.5%.
Is indexation benefit available for properties purchased after April 2001?
No, the benefit of indexation is not available for properties purchased after April 2001.
How can taxpayers choose the cost of acquisition for properties purchased before 2001?
Taxpayers can choose between the actual cost of acquisition and the fair market value as of April 1, 2001, as the base for calculating LTCG.
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