Selling Your House? | Major Tax Changes You Need to Know | Long-Term Capital Gains Tax | News9 Live

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Thinking about selling your house? It’s a big move, both emotionally and financially. For many of us, a home is our largest investment, so selling it means dealing with biggest sums of money in our lifetime. This year’s Budget has brought some new twists and turns that could impact how much money you actually walk away with after the sale.

Mainly, The changes to long-term capital gains or LTCG taxes. But now there’s news that the finance ministry could be reviewing and modifying the new LTCG rules.

The proposed changes might push the effective date of the new LTCG rules to the next financial year, instead of making them effective from the day the Budget was presented, that is July 23. This means you might have a little more time to plan and prepare for these changes. Additionally, there’s talk about grandfathering certain assets. What does this mean? Essentially, if you bought your property before a certain date, the old rules might still apply to you, which could be beneficial.

The Budget had proposed lowering the LTCG tax from 20% to 12.5%, which sounds great, right? But here’s a catch - they also want to remove the indexation benefit for properties bought on or after April 1, 2001. Now, what is indexation? It adjusts the purchase price of your property for inflation, which usually means you pay less in taxes when you sell. Without this benefit, you might end up paying a lot more in taxes, especially if you’re selling an older property.

Imagine you bought a house a long time ago for a relatively low price. Now due to inflation, that house is worth much more today. Under the current rules, indexation would help reduce the taxable gain, but without it, you’re looking at a much higher tax bill.

The industry has been vocal about these concerns, suggesting that the government should take another look at this rule, similar to what they did in 2018 when they reintroduced LTCG tax on equities but kept some beneficial provisions. One key provision that might stay is the rollover benefit. This allows you to reinvest the money from the sale of your home into another property without immediately paying LTCG tax. However, if you’re not planning to buy another property and just want to cash out, this doesn’t help you and you could end up with a hefty tax bill.

The day after the Budget announcement, on July 24, the income tax department provided some clarifications. One major point was about how to determine the cost of acquisition for properties bought before April 1, 2001. For these properties, the cost will be either the original purchase price or the fair market value as of April 1, 2001, whichever is higher, but not exceeding the stamp duty value.

So, what does all this mean for you? If you’re planning to sell your property soon, consider consulting with a tax professional. And if the government decides to tweak these provisions, it could give you some breathing room to plan your next steps.

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