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Property · Property Sale and CG

LTCG on Property, 12.5% (No Indexation) vs 20% (With CII): Choose Lower

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Budget 2024 changed everything for property taxation. For property purchased before July 23, 2024: taxpayer chooses between 12.5% (no indexation) or 20% with Cost Inflation Index, whichever gives lower tax. For property purchased after July 23, 2024: only 12.5% without indexation applies. This one choice can save ₹3-8 lakhs on a typical property sale.

Provisions

Sec 45; Sec 72 (old 48); Finance Act Budget 2024; Sec 78 (old 50C); Sec 197 (old 112)

Analysis

The Budget 2024 transitional choice, worked example: Property bought 2015 for ₹40L. Sold 2025 for ₹1Cr. Holding: 10 years. OPTION A (12.5% no indexation): LTCG = ₹1Cr − ₹40L = ₹60L. Tax = ₹7.5L. OPTION B (20% with CII indexation): CII 2015 = 254, CII 2025 = 363 (approx). Indexed cost = ₹40L × 363/254 = ₹57.1L. LTCG = ₹1Cr − ₹57.1L = ₹42.9L. Tax = 20% × ₹42.9L = ₹8.58L. OPTION A (12.5%) is LOWER. Choose Option A. When Option B (20% with indexation) wins: If property was bought in 1995-2005 era: very high indexation benefit. Example: bought 1998 for ₹8L, sold 2025 for ₹60L. CII 1998 = 351, CII 2025 = 363. Wait, CII doesn't go that far back directly. For very old properties: use FMV as on April 1, 2001 as the cost (instead of actual cost). This resets basis to 2001 FMV which is much higher than 1998 cost. Then index from 2001.

Close

  1. Determine purchase date: if before July 23, 2024 → get both options. After → only 12.5%.
  2. For pre-Jul 2024 property: compute LTCG under BOTH options, pick whichever gives lower tax
  3. Gather cost documents: purchase deed, stamp duty receipts, registration charges, brokerage paid
  4. List all cost of improvement: major renovation with bills, structural additions with contractor bills
  5. Check stamp duty (circle rate) value: if buyer paid stamp duty on higher value → Sec 78, Income-tax Act 2025 (old Sec 50C) applies
  6. Transfer expenses: get brokerage receipt, legal fee receipts

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