Capital Gains Tax on Property Sale (House, Commercial, Land) in 2024
1.
Tax on Short-Term Capital Gains (STCG) on Listed Equity Shares and
Equity-Oriented Mutual Funds
As
per Section 111A of the Income Tax Act, the taxation of short-term capital
gains (STCG) on equity shares and equity-oriented mutual funds has been
revised.
New
Tax Rates on STCG
|
Type of Gain |
Transaction Date |
Tax Rate |
|
STCG on listed equity shares,
equity-oriented mutual funds, and business trust units (where STT is paid) |
Before 23rd July 2024 |
15% |
|
STCG on listed equity shares,
equity-oriented mutual funds, and business trust units (where STT is paid) |
On or after 23rd July 2024 |
20% |
Basic
Exemption and Rebate Applicability
- If
the taxpayer’s total income (excluding STCG) is below the basic
exemption limit, STCG will first be adjusted (or reduced)
before LTCG is considered against the remaining exemption limit.
- No
rebate under Section 87A is
available on STCG.
2.
Tax on Long-Term Capital Gains (LTCG) on Listed Equity Shares and
Equity-Oriented Mutual Funds
As
per Section 112A of the Income Tax Act, the taxation of long-term capital gains
(LTCG) on listed equity shares and equity-oriented mutual funds has been
revised.
New
Tax Rates on LTCG
|
Type of Gain |
Transaction Date |
Tax Rate |
|
LTCG on listed equity shares,
equity-oriented mutual funds, and business trust units (where STT is paid) |
Before 23rd July 2024 |
10% (on gains exceeding ₹1,00,000) |
|
LTCG on listed equity shares,
equity-oriented mutual funds, and business trust units (where STT is paid) |
On or after 23rd July 2024 |
12.5% (on gains exceeding ₹1,25,000) |
Basic
Exemption and Rebate Applicability
- The
first ₹1,25,000 of LTCG remains tax-free.
- If
the total income (excluding LTCG) is below the basic exemption
limit, LTCG will be adjusted against the remaining exemption limit after
adjustment of STCG.
- No
rebate under Section 87A is
available on LTCG.
3.
Tax on Winnings from Lottery, Betting, Gambling, and Games
The
taxation of winnings from lottery, betting, gambling, and other games remains
unchanged under Section 115BB of the Income Tax Act.
New
Tax Rates on Winnings
|
Source of Income |
Tax Rate |
Basic Exemption |
Rebate under Section 87A |
|
Lottery,
Gambling, Betting, and Game Winnings |
30% |
Not available |
Not available |
Key
Points
- Flat
30% tax rate applies
to all winnings.
- No
deduction, basic exemption, or rebate is available.
- Online
games are taxed separately under Section 115BBJ.
4.
Changes in New Tax Regime Slab Rates (Section 115BAC)
The
Finance Act (No.2), 2024, had introduced the following slab rates under
the new tax regime for individuals, HUFs, AOPs (excluding
co-operatives), BOIs, and artificial juridical persons.
Old
Slab Rates under New Tax Regime (As per Finance (No.2) Act, 2024)
|
Total Income (₹) |
Tax Rate |
|
Up
to ₹3,00,000 |
Nil |
|
₹3,00,001 – ₹7,00,000 |
5% |
|
₹7,00,001 – ₹10,00,000 |
10% |
|
₹10,00,001 – ₹12,00,000 |
15% |
|
₹12,00,001 – ₹15,00,000 |
20% |
|
Above
₹15,00,000 |
30% |
Proposed
New Slab Rates (Budget 2025)
|
Total Income (₹ in Lakhs) |
Tax Rate |
|
0
– 4 Lakhs |
0% |
|
4
– 8 Lakhs |
5% |
|
8
– 12 Lakhs |
10% |
|
12
– 16 Lakhs |
15% |
|
16
– 20 Lakhs |
20% |
|
20
– 24 Lakhs |
25% |
|
More
than 24 Lakhs |
30% |
Key
Changes in the New Tax Regime
- Higher
Exemption Limit: Tax-free
income increased to ₹4 Lakhs from ₹3 Lakhs.
- Rebate
under Section 87A: Maximum
rebate available is ₹60,000, applicable for taxpayers
earning up to ₹12 Lakhs.
- Marginal
Relief on Income Above 12 Lakhs
- No
rebate on income from capital gains, lottery winnings, or other incomes
taxed at special rates.
Section
54 of the Income
Tax Act deals with the tax treatment of long-term capital gains arising from
the sale of residential property. Here's a summary of the key provisions:
1) Exemption of Capital Gains:
a) If an individual or Hindu
Undivided Family (HUF) sells a residential property (used as a house) and uses
the capital gain to purchase or construct a new residential house in India, the
capital gain may be exempt from tax, subject to certain conditions.
b) The new property must be
purchased within one year before or two years after the transfer of the
original property or constructed within three years.
2) Taxable Capital Gain:
a) If the capital gain exceeds the
cost of the new property, the excess amount will be taxed as income.
b) If the capital gain is less than
or equal to the cost of the new property, no tax will be levied, but the cost
of the new property will be reduced by the capital gain amount for future
capital gain calculations.
3) Option to Buy Two Residential
Houses:
a) If the capital gain is under ₹2 crore, the taxpayer may opt to purchase or
construct two residential houses in India instead of one, and the same
exemption applies.
b) However, once this option is
exercised for a particular assessment year, it cannot be exercised again in the
same or any future year.
4) Limit on Cost of New Asset:
a) If the cost of the new property
exceeds ₹10 crore, only ₹10 crore will be considered for tax exemption, and
the excess amount will be ignored.
5) Deposit of Unused Capital Gains:
a) If the capital gain is not
utilized for purchasing or constructing the new house within the specified
timeline, it must be deposited in a designated account before filing the return
of income. The capital gain amount will be treated as the income of the year if
not utilized within the prescribed period.
6) Non-utilized Capital Gain:
a) If the deposited amount is not
used for the new house purchase or construction within three years from the
original asset’s sale, it will be taxed as income.
Important
Amendments (2023):
- A
provision was added that limits the consideration of capital gains above ₹10 crore for both the new
house purchase and deposited capital gains.
This
section encourages the reinvestment of long-term capital gains into residential
properties, offering tax relief in certain conditions.
Section
54EC of the
Income Tax Act provides a tax benefit for individuals who transfer a long-term
capital asset (such as land or building) and reinvest the capital gains into
specified bonds within six months of the transfer. Here's a breakdown of how it
works:
1) Capital Gain Exemption: If you invest the capital gains
from the sale of a long-term capital asset into a long-term specified asset
(such as bonds issued by the National Highways Authority of India or Rural
Electrification Corporation), you can claim an exemption from tax on the
capital gain.
a) If the cost of the long-term
specified asset is equal to or greater than the capital gain, the entire
capital gain will be exempt from tax.
b) If the cost of the specified
asset is less than the capital gain, only a proportionate amount of the capital
gain will be exempt based on the ratio of the cost of the asset to the total
capital gain.
2) Investment Limit: The total investment in
specified bonds in a financial year cannot exceed ₹50 lakh. This includes investments made during the
year in which the original asset is transferred and in the following financial
year.
3) Three-Year Lock-In: The specified bonds must be
held for a minimum period. If they are sold or converted into money (except by
transfer) within three years, the capital gains exemption will be revoked, and
the gains will be taxed in the year the bond is converted into money.
4) No Double Deduction: You cannot claim a deduction
under section 80C for the investment in these specified bonds, which is also
considered for capital gains tax exemption under section 54EC.
5) Eligibility of Bonds: These bonds include those
issued by the National Highways Authority of India or Rural Electrification
Corporation, with specific conditions set by the government. The bonds issued
after April 1, 2007, must be redeemable after three years, and after April 1,
2018, they must be redeemable after five years.
In
summary, section 54EC allows you to save tax on capital gains from the sale of
long-term assets by reinvesting in specified bonds, subject to certain
conditions.
Section
54F of the
Income Tax Act, allows for a capital gains exemption when a taxpayer, either an
individual or Hindu Undivided Family (HUF), sells a long-term capital asset
that is not a residential house and uses the proceeds to buy or construct a
residential house in India.
Here's
a breakdown of key provisions and rules outlined:
1) Capital Gain Exemption Criteria:
a) Full Exemption (Clause a): If the cost of the new
residential property is at least as much as the net sale consideration from the
original asset, the entire capital gain on the transfer of the original asset
will be exempt from tax.
b) Partial Exemption (Clause b): If the cost of the new property
is less than the sale consideration, the exemption will apply proportionally.
The exempt portion of the capital gain will be in the same proportion as the
cost of the new property to the sale consideration.
2) Exemption Conditions:
a) The taxpayer must not own more
than one residential house (other than the new one) on the date of transfer.
b) They should not purchase or
construct another residential house within one year of the transfer or three
years after the transfer of the original asset.
3) New Provisions (Finance Act,
2023):
a) If the cost of the new
residential property exceeds ₹10 crores, only ₹10 crores will be considered for the exemption. The
excess amount will not be eligible for the capital gains relief.
4) Subsequent Transfers of the New
Asset:
a) If the new property is sold
within three years of its purchase or construction, the capital gain exemption
previously granted will be reversed, and the amount will be taxed as long-term
capital gain.
5) Utilization of Capital Gain:
a) The taxpayer must utilize the
capital gain for the purchase or construction of the new asset. If not fully
utilized by the due date of filing the income tax return, the unutilized amount
should be deposited in a specified account. This amount can then be used for
the purchase or construction of the new asset within the allowed period.
b) If the amount is not utilized as
required, the exemption previously granted will be partially or fully reversed.
This section is designed to encourage investment in residential properties and to allow tax relief for those making such investments after selling long-term assets. However, there are strict timelines and conditions under which the exemption can be fully utilized.