Indexation ends, government gives a shock to those who invest in property and gold

Union Budget 2024: In the name of investment in India, common people buy gold, buy houses and after a few years sell the house and make a profit, but today the Finance Minister has changed the calculation of the profit on buying and selling a house. Now you will have to pay more tax to the government on selling the property, because in Budget 2024, Finance Minister Nirmala Sitharaman has completely abolished indexation in all non-financial assets. These non-financial assets include things like property, gold, silver.

In the earlier system, the period of capital gain on gold was 36 months and there was a separate period on property, along with this there was a separate period on non-financial assets stocks and bonds, but now two periods will be applicable in these, in which long term capital gain tax will be levied on bonds after the first 12 months and long term capital gain tax will be levied on gold and property after 24 months. The government has changed the rate of long term capital gain tax, in which the tax rate on investing in equity, mutual funds and bonds has been increased from 10 to 12.5 percent. Whereas in gold and property it has been reduced from 20 to 12.5 percent.

However, you may be happy for a short time thinking that the government has reduced the long term capital gain tax on gold and property, so now you will have to pay less tax, but the real story begins after this. Because till now people used to get the benefit of indexation on saving gold and property, which has been abolished in this year's budget.

You must be wondering what is indexation, so understand this too. In indexation, tax exemption is given on the basis of inflation rate, money spent on repairing the property or its development. On the basis of which a person investing money in a non-financial asset for a long time used to get exemption in tax on the profit made after selling it.

Base Year of Indexation

Initially 1981-82 was considered as the base year, but taxpayers were facing difficulties in getting the properties purchased before 1 April 1981 assessed. Hence the government decided to change the base year to 2001 so that the assessment could be done properly and at that time indexation was considered as 100.

Financial Year (CII)

• 2001-02———–100
• 2002-03———–105
• 2003-04———–109
• 2004-05———–113
• 2005-06———–117
• 2006-07———–122
• 2007-08———–129
• 2008-09———–137
• 2009-10———–148
• 2010-11———–167
• 2011-12———–184
• 2012-13———– 200
• 2013-14———–220
• 2014-15———–240
• 2015-16———–254
• 2016-17———–264
• 2017-18———–272
• 2018-19———–280
• 2019-20———–289
• 2020-21———–301
• 2021-22———–317
• 2022-23———–331
• 2023-24———–348
• 2024-25———–363

Like this Understand the example

If you bought a property for Rs 10 lakh in the year 2001 and in the year 2024-25 you sell it for Rs 90 lakh, then in this way you have made a profit of Rs 80 lakh or say capital gain. LTCG i.e. Long Term Capital Gain tax is levied on this capital gain. In which if you deduct indexation from Rs 80 lakh, then you had to pay tax on the amount after that, but after what the Finance Minister has done in this budget, experts believe that now it will have to be paid more than before.

How is Indexation calculated?

In the year 2001-02, the indexation was 100, which increased to 363 in 2024-25. In such a case, we multiply Rs 10 lakh of 2001 by the cost inflation index of 2024-25 and divide it by the cost inflation index of 2001-02 and the amount obtained is subtracted from the amount sold, which is your indexation amount and the long term capital gain tax is paid on the amount obtained after subtracting it from the amount sold.

10,00,000 x 363/100 = 3,630,000, this is the indexation amount.

80,000,00 – 3,630,000 = 4,370,000 Earlier 20% tax was to be paid on this amount which was 874,000

Now the government has abolished indexation, so in such a case, tax at the rate of 12.5% ​​will have to be paid on 80 lakhs which will become Rs 1,000,000.