The Ministry of Finance is currently evaluating several options regarding the newly announced revised Long Term Capital Gains (LTCG) regime, which aims to eliminate indexation benefits for property, gold, and other unlisted assets.
The tweaks to the Finance Bill may be undertaken in the run-up to the passage of the Finance Bill 2024-25 in Parliament.
How much tax do I have to pay? Calculate now
Sources have told Business Today TV that the proposal is to apply the indexation change prospectively, starting from FY26 instead of the current year, to provide ample time for individuals planning to sell their properties.
The new provisions for the taxation of capital gains came into force on July 23, 2024.
Another proposal under consideration is to offer property sellers a choice between a 20 percent rate with indexation and a 12.5 percent rate without indexation under section 112 of the IT Act.
However, some officials are not in favor of this option as it could complicate the process.
“The rationale is to simplify and not complicate,” said an official.
Sources added that while there is no plan to reverse the decision, some adjustments might be made to mitigate the impact, as suggested by industry stakeholders.
The indexation benefit allowed taxpayers to adjust the acquisition cost for inflation before computing capital gains, reducing their tax liability. The government issues the Cost Inflation Index (CII) for this purpose.
Union Finance Minister Nirmala Sitharaman, speaking at the Post Budget Conclave of Business Today-India Today, said, “Why do we have this differentiation between all asset classes? Why can’t we rationalize and make it simple? Different treatment and different rates for gold, stock, property. I need to treat all asset classes equally.”
The Centre has raised Rs 2.78 lakh crore from LTCG taxes over the past five years. For the assessment year 2023-24, the Centre collected Rs 98,682 crore from LTCG, compared to Rs 86,075 crore collected for the 2022-23 assessment year.