Capital Gain - Indexation together with 54EC

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Recent tax law changes effective from 23rd July 2024 have removed indexation benefits for capital gains on land and buildings transferred after this date, introducing a flat 12.5% tax rate. However, a grandfathering provision allows individuals and HUFs to use indexation for assets acquired before 23rd July 2024, opting for the old 20% tax rate if it's more beneficial than the new flat rate. This discussion explores the conflict encountered when trying to apply both indexation and the 54EC bond investment benefit in tax filings.

CA Bharanni Ashok

CA Bharanni Ashok (Querist)
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07 September 2025 Immovable property (Land & building) sold on 29th October 2024. Capital gain portion after indexation invested wholly in 54 EC bonds. But, when I fill up the capital gain schedule, it's not allowing me to avail both indexation benefit and investment in 54EC both. If I change the date of transfer to June, there is no Capital gain which attracts tax. Please guide.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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07 September 2025
Read: : The Finance (No. 2) Act, 2024 removed the indexation benefit and introduced a uniform tax rate of 12.5% on long-term capital gains. As per the amendment, no indexation benefit is allowed while computing capital gain from long-term capital assets transferred on or after 23-07-2024. However, the Government has introduced a grandfathering provision.
This provision allows resident individuals and resident HUFs to still apply indexation on land or building acquired before 23-07-2024 and pay tax at the old rate of 20% if the tax under the new law (i.e., tax calculated at 12.5% without indexation benefit) results in a higher amount.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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20 September 2025 Good Luck..

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