Capital Gains Shake-Up 2024: Understand 12.5% Tax Regime

The new budget has brought amendments, which were launched by the Finance Act (No. 2) of 2024 to simplify capital gains taxation but also eliminate the inflation adjustment benefit for future transactions.

Capital gain is levied on the profit earned from the sale of capital assets such as real estate, stocks and bonds.

For transfer before July 23, 2024

• Long-term capital gains (LTCG) on the sale of immovable property are taxed at 20% and Indexation benefits are available to adjust the cost of acquisition for inflation.

For transfer on or after July 23, 2024

• Long-term capital gains (LTCG) are taxed at 12.5% and no indexation benefit is available
• Tax-Saving Options in LTCG from Property

Who Can Claim Exemption Under Section 54?

An individual or HUF can claim the exemption under Section 54. Under this section, the eligible asset is a long-term residential house property, whereas another residential house (in India) is the new Asset Required.

Time Limits: Purchase within 1 year before or 2 years after transfer, or construct within 3 years after transfer.

Monetary Limits: Exemption is limited to actual capital gain invested, and if capital gain is more than Rs 10 crore, then exemption is restricted to the Rs 10 crore limit introduced for AY 2024-25.

(Exemption can be claimed for investment in 2 houses once in a lifetime if the capital gain is less than or equal to Rs 2 crore.

Who Can Claim Exemption Under Section 54EC?

Any taxpayer or individual, HUF, or Company can claim the exemption under section 54EC, and the eligible asset is Long-term capital assets, being land or a building or both, whereas notified bonds such as NHAI, REC, PFC, and IRFC are new assets required.

Time Limits: Investment should be made within 6 months from the date of transfer.

Monetary Limits: The Maximum investment limit is Rs 50 Lakh per financial year, per assesse,e and bonds have a five-year lock-in.

(Exemption amount: Lower of (a) LTCG or (b) amount invested in bonds.

Who can claim Section 54F Exemption:

Any individual or HUF can claim the exemption under Section 54F, and an eligible asset is any long-term capital asset other than a residential house example plot, commercial property, gold or shares. whereas a residential house in India is the new asset required.

Time Limits: Time limits are the same as Section 54 purchase 1 year before/2 years after, construct within 3 years.

Monetary Limits: No fixed monetary limits like Section 54 (Rs. 10 crore)

Exemption: Exemption proportionate to Net Sale Consideration invested: Exemption= LTCG x (Amount Invested/Net Sale Condieration) Exemption= LTCG x (Amount Invested/Net Sale Consideration)

Condition: On the date of transfer, the taxpayer should not own more than one residential house other than the new one, and if full consideration is not invested, the exemption is partial.