Become a Govt. Certified GST Practitioner in just 60 hrs. Register Now!

Income tax query capital gain & exemption

Krishna (Assistant) (702 Points)

28 April 2025

In case of long term capital gain. From 23 jul 2024 to get full exemption of long term capital gain, amount needs to invest us 54/54F/54EC is sale consideration minus cost of acquisition. Here indexed cost of acquisition benefit will not get. Because second proviso to section 48 says indexed cost is available only asset transfer takes place before 23 July 2024.

Only while calculating tax liability we can choose the option to pay tax @ 12.5 without index or 20% with index

Is this correct ?

Reply
Follow
Share

4 Replies

Rama chary Rachakonda (Master in Accounts & high court Advocate email ID:ramachary64@gmail.com voice no:9989324294) (7494 Points)
Replied 28 April 2025

Long-Term Capital Gain Exemption For long-term capital gains arising from the transfer of assets on or after July 23, 2024, the tax exemption under sections 54, 54F, and 54EC requires investment of an amount equal to the sale consideration minus the cost of acquisition.

Indexed Cost of Acquisition The second proviso to section 48 of the Income Tax Act provides that the benefit of indexed cost of acquisition is not available for assets transferred on or after July 23, 2024.

Tax Liability Calculation When calculating the tax liability for long-term capital gains, you have the option to choose between: - Tax Rate of 12.5% without Indexation: Pay tax at 12.5% of the long-term capital gains without claiming the benefit of indexation. -

*Tax Rate of 20% with Indexation*: Pay tax at 20% of the long-term capital gains after claiming the benefit of indexation, but this option is not available for assets transferred on or after July 23, 2024. Key Points -

*No Indexation Benefit for Exemption*: For exemptions under sections 54, 54F, and 54EC, the amount to be invested is calculated without considering the indexed cost of acquisition for assets transferred on or after July 23, 2024. -

*Tax Calculation Options*: You can choose between paying tax at 12.5% without indexation or 20% with indexation (if the asset was transferred before July 23, 2024) when calculating the tax liability [1].

Upgrade to CAclubindia Pro. Subscribe Now!

Gautam Bothra (Chartered Accountant) (46 Points)
Replied 28 April 2025

Dear Sir

Please refer to 2nd proviso to Sec 112(1)(ii)

"Provided further that in the case of transfer of a long-term capital asset, being land or building or both, which is acquired before the 23rd day of July, 2024, where the income-tax computed under item (B) exceeds the income-tax computed in accordance with the provisions of this Act, as they stood immediately before their amendment by the Finance (No. 2) Act, 2024, such excess shall be ignored;"

Accordingly even for properties transferred post July 23, 2024, lower of 12.5% without indexation and 20% with indexation is applicable provided the property was acquired before July 23, 2024.

Krishna (Assistant) (702 Points)
Replied 28 April 2025

No sir, only in case tax computation we have option to choose. But In capital gain computation only cost has to be considered & not indexed cost. It's confirmed. Second proviso to section 48 clearly says this & also ICAI study mat.