In the 2024 Budget, Finance Minister Nirmala Sitharaman announced the removal of the indexation benefit for property sales, significantly impacting individuals selling their properties. The indexation benefit previously allowed sellers to adjust the purchase price of their property for inflation, reducing their taxable capital gains. With this benefit now removed, sellers will face higher tax liabilities.
Previously, long-term capital gains (LTCG) from property sales were taxed at 10% with the indexation benefit. The new Budget documents indicate that the tax rate for LTCG on property sales will increase to 12.5% without the indexation benefit.
Earlier gains
Under the previous taxation rules, taxpayers could adjust the purchase price using the Cost Inflation Index (CII) numbers specified by the Income Tax Department.
The CII is released annually by the Income Tax Department and tracks inflation changes over time. By using the inflation-adjusted cost, taxpayers could reduce their taxable capital gain, potentially resulting in lower taxes. This benefit applied to certain assets, including property, until its removal in Budget 2024.
With the new rule in effect, the purchase price will no longer be adjusted for inflation, leading to a higher taxable capital gain and increased tax liability.
