New Delhi. The Central Board of Direct Taxes (CBDT) has changed an important tax rule, so that now if people sell land, house or any other property, they can get some relief in tax.
Actually, when a person sells a property bought a long time ago, its price automatically increases due to inflation in the meantime. There is a system to find out the effect of this inflation, which is called Cost Inflation Index (CII). Now the government has increased this index from 363 to 376.
This means that if someone has bought a property earlier and now sells it, then the purchase price will now be considered higher than before. When the capital gain i.e. profit is calculated (selling price – indexed purchase price), the profit will be less and the tax applicable on it will also be less. This new index will be applicable from the financial year 2025–26 and assessment year 2026–27.
Not everyone will benefit
The government’s argument is that when the price of a property increases only due to inflation, then that part should not be taxed. But this time one more thing has been changed. That is, now the benefit of CII will be available only in a few cases. In the 2024 budget, an attempt was made to simplify the tax rules, and now this indexation benefit will be available only on those properties that have been sold before 23 July 2024.
Yes, if someone bought land or house before 23 July 2024, and sells it later, he will get two options. First – pay 12.5 percent tax, without indexation, second – pay 20 percent tax, but with the benefit of indexation. That is, this new CII (376) will be useful for those who have old property. But NRIs, companies and LLPs will not get this option.
According to a report by Livemint, tax expert Amit Maheshwari says that it is important for CII to be updated every year so that people can properly plan their tax on capital gains. Earlier this system was used for long term capital gains on land, house, gold, patent, securities etc. But now according to the new rule, this facility will be closed after 23 July 2024, except for those properties which were purchased earlier.
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