Income tax on buyback of share in Union Budget 2024
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- Published date: July 29, 2024
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- Lucknow City, Lucknow, Uttar Pradesh, India
The recent budget has introduced significant changes to property taxes, impacting both traders and investors. Previously, investing in property was seen as highly profitable, but new tax regulations have increased financial liabilities.
The Impact of New Tax Regulations
Property owners now face higher taxes when selling property. The government has eliminated indexation benefits, which previously allowed adjustments for inflation, resulting in higher tax payments.
Understanding Long-Term Capital Gains (LTCG) Tax
LTCG tax applies to the entire profit from property sales. The removal of indexation benefits means that sellers cannot adjust the purchase price against inflation, leading to higher taxable gains.
What is Indexation?
Indexation allowed property owners to adjust the purchase price based on inflation rates, reducing taxable gains. Without it, property owners face higher tax liabilities.
Comparing Old and New Tax Calculations
Example:
- Old System: A property bought for ₹28 lakhs in 2009 and sold for ₹65 lakhs in 2024 would have an indexed cost of ₹71.12 lakhs, resulting in no taxable gain.
- New System: The same property would have a capital gain of ₹37 lakhs, subject to 20% LTCG tax, resulting in a ₹7.4 lakh tax liability.
Real-Life Implications for Homeowners
Homeowners now face unexpected tax liabilities, potentially discouraging property sales and affecting the real estate market.
Effects on Property Prices
Increased tax liabilities may deter potential buyers, leading to a slowdown in the real estate market and broader economic impacts.
Conclusion: Navigating the New Tax Landscape
Property owners must adapt to these changes to avoid financial burdens. Consulting tax professionals, evaluating sale timing, and staying informed about future tax changes are essential steps to mitigate these impacts.
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