WELCOME MOVE TO BRING BACK INDEXATION WHEN TAXING PROPERTY

Heeding the growing chorus of resentment on long term capital gains (LTCG) tax on unlisted assets, particularly property, Finance Minister Nirmala Sitharaman has rightly decided to amend the Budget proposals to provide a flexible option for calculating LTCG tax.

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For assets such as land or buildings acquired before July 23, taxpayers can now choose between the new and old regimes based on the benefits. Under the new proposals, tax on capital gains was reduced to 12.5 percent from 20 percent; but the adjustment for inflation-known as indexation— was done away with for properties bought after 2001. Indexation allowed capital gains to be calculated lower by deducting inflation's impact on the price since the time the property was bought. This translated into 20 percent higher tax on properties purchased before 2010.