If you plan to sell an old property purchased in or after 2001, you might face higher taxes than before due to the removal of indexation benefit. But there is a way to completely avoid LTCG tax.
With the recent removal of the indexation benefit in Budget 2024, selling property purchased after 2001 will incur more long-term capital gains (LTCG) tax.
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However, property sellers can still avoid paying this tax completely.
If individuals use the capital gains from selling their old house to invest in a new property, they will be exempt from paying any LTCG tax.
Revenue Secretary Sanjay Malhotra has confirmed the same
“Tax kicks in only if the gains are not reinvested in a house. If you sell a house and you buy a house using only the gains, there is no taxation,” he was quoted as saying by The Economic Times.
Indexation gone, impact on old property sale
If you plan to sell an old property purchased in or after 2001, you might face higher taxes than before.
Previously, sellers in India could reduce their tax burden through indexation benefits, which adjusted the property’s sale profit by the inflation rate during ownership.
This adjustment often led to significant tax savings.
However, this benefit is no longer available for properties purchased from 2001 onwards, which are now subject to a 12.5% LTCG tax upon sale.
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What is indexation?
Indexation adjusts the purchase price of an asset to account for inflation over time, which is then used to calculate capital gains.
