New LTCG Rules: Interest and Stamp Duty excluded from Base Price for Calculation; Says Revenue Secretary

Revenue Secretary Sanjay Malhotra announced Wednesday that interest costs and stamp duty will not be included in the base price when calculating long-term capital gains (LTCG) on properties. The latest Budget proposes a new way to tax long-term capital gains on properties at a lower rate but without indexation.

Indexation adjusts the purchase price of an asset to account for inflation, thereby reducing taxable gain. However, under new rules, this adjustment will no longer be available.

Currently, the base price for LTCG calculation is the amount paid to the seller of the property. If the buyer takes out a loan to purchase property, the interest paid on that loan does not get added to the base price. According to Malhotra, this rule will remain unchanged. Therefore under the new system, only the amount directly paid to the seller will be considered for LTCG calculations.

Furthermore, Malhotra clarified that stamp duty payments, which are mandatory fees paid during the property purchase process will also not be included in the base price for calculating capital gains. This policy is consistent with the current system.

In addition to these updates on property taxation. Malhotra touched upon old disputes related to the Angel Tax. Angel Tax refers to the tax levied on capital raised by unlisted companies via the issue of shares. This happens when the share price is considered in excess of fair market value. These disputes have been a point of contention for many startups and investors.

Malhotra mentioned that these old Angel Tax disputes might be resolved under the new Direct Tax Vivad se Viswas Scheme 2024. This scheme is designed to settle pending tax disputes quickly and amicably.

These changes aim to simplify tax procedures and offer clarity to property buyers and investors. Ensuring that the calculation of long-term capital gains is straightforward and fair.