Budget 2024 and Its Impact on LTCG Tax
The 2024 Budget introduced significant changes that shocked many property sellers, especially concerning Long-Term Capital Gains (LTCG) tax. However, there’s good news—Section 54 of the Income Tax Act still offers a way to pay zero tax on LTCG.
Understanding LTCG Tax on Property Sales
What Is LTCG Tax?
- Definition: Long-Term Capital Gains (LTCG) tax is levied on the profit made from the sale of a property held for more than two years.
- New Budget Changes: The 2024 Budget has removed certain indexation benefits, making it crucial for sellers to explore other tax-saving avenues.
How Section 54 Helps You Save on LTCG Tax
What Is Section 54?
- Tax Exemption: Section 54 of the Income Tax Act allows you to claim exemption on LTCG tax if you reinvest the proceeds from the sale of your house into purchasing or constructing another residential property within a specified period.
- Eligibility: The exemption applies if the reinvestment is made within one year before or two years after the sale, or if construction is completed within three years.
Steps to Claim Exemption Under Section 54
- Sell Your Property: Ensure the property sold qualifies as a long-term capital asset.
- Reinvest in Residential Property: Purchase or construct another residential property within the stipulated time.
- Claim Exemption: At the time of filing your income tax returns, claim the exemption under Section 54 to offset your LTCG tax liability.
Maximizing Tax Savings Despite Budget 2024
Planning Your Property Sale
- Timing Matters: Plan the sale and reinvestment carefully to ensure compliance with Section 54.
- Consult a Tax Advisor: Given the removal of indexation benefits, seeking professional advice is crucial for optimizing tax savings.
What If You Can’t Reinvest Immediately?
- Capital Gains Account Scheme: If you cannot immediately reinvest in another property, deposit the LTCG amount in a Capital Gains Account Scheme (CGAS) to maintain eligibility for Section 54 benefits.
