The capital gains tax is the levy on the profit that an investor makes when an investment is sold. It is owed for the tax year during which the investment is sold. Now with the revised jantri rates or government land valuation certificate (LVC), comes the implied: a steep rise in capital gains, both for the new property owner and the seller.
In a recent circular, the Central government had fixed a period of 24 months to calculate short-term and long-term capital tax gains.
For properties that are sold to a new buyer within 24 months of ownership, a capital gains tax of 30% will be levied on the profit earned. If the property is owned for more than 24 months and then sold, then a long-term capital gains tax of 20% will be imposed on the profit earned.
Explaining the same, a senior official of the revenue department shared that if the seller is taxed under long-term capital gains tax, he/she can avail of the benefits of indexation.
“Indexation helps the seller adjust the cost of acquisition of property against inflation. When indexation comes into the picture, the cost of purchase increases significantly, in effect lowering the tax outgo and thus, adding to one’s savings. In case the seller is to pay short term capital gains tax, then the taxation will differ,” explained tax experts.
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