Restricted benefit of lower capital gain tax @12.50%

 

The budget has been passed by both the houses of Parliament is now awating presidential assent. However, the benefit of grand fathering is conferred half heartedly. Though Government aims to simplify the laws, but the half hearted benefit make it little more complex and taxpayers would be required to check the dates before moving forward. Let us know about it.

1. By virtue of the amendment in the Finance (No.2) Bill, 2024, the grandfathering protection has been added for LTCG on Immovable Property acquired before 23.7.2024 and transferred on or after 23.7.2024 by resident individuals & HUFs by restricting their LTCG tax liability to the lower of the two options: 20% with indexation or 12.5% without indexation.

2. However, long term capital loss, if any, arising due to indexation on such transfers on or after 23.7.2024, will get lapsed.

3. As a result of avove,
(A) LTCG on Immovable Property acquired before 23.7.2024 and transferred between 1.4 2024 and 22.7.2024 will be taxable @ 20% with indexation.
(B) LTCG on Immovable Property acquired before 23.7.2024 and transferred on or after 23.7.2024 will be taxable @ 20% with indexation or 12.5% without indexation, whichever is lower.

4. Instead of just referring income-tax computed under item (B), in the amendment done in Bill No. 2, the more fairer treatment would have been to cover item (A) also, such that all transfers of Immovable property on or after 1.4.2024 gets both the same options.

5. The grandfathering has been proposed only in respect of transfers of Immovable properties by resident Indian individuals & HUFs, and not by corporates, firms & LLPs.

The more Government try to simplify the law, the more complex it becomes.