I am a domestic individual taxpayer. I bought a house for… ₹1 crore a few years ago. Now I have sold the house in 2024 for Rs 1.25 crore. What would my tax liability be for the capital gains under the new scheme? The indexed long-term capital calculated for the house is a loss, and I have long-term gain from selling listed shares. Can I offset the indexed long-term capital loss on the house against the long-term capital gains on the sale of listed shares and pay tax on the balance of the long-term capital gains?
The budget presented on July 23, 2024 has drastically changed the long-term capital gains tax system. The benefit of indexation has been removed for the purpose of calculating long-term capital gains, except for the payment of tax on long-term capital gains arising from the sale of land or building by a resident individual or an HUF.
Thus, an individual and the HUF have the two options of paying tax on long-term gains arising from the sale of land or building acquired before July 23, 2024. In such a case, the individual or the HUF can therefore pay to reduce the tax. tax payable at 20% on indexed long-term capital gains or @ 12.50% on non-indexed long-term capital gains. Because indexation results in long-term capital loss, you do not have to pay tax when selling your home.
Tax implications of selling homes under new capital gains rules
With regard to the offset of losses under capital gains, short-term losses can be offset against any capital gains, including long-term capital gains or short-term capital gains. Long-term capital losses, on the other hand, can only be offset against long-term capital gains.
A simple reading of the provisions might lead you to conclude that you can offset the indexed long-term capital loss on the sale of your house against the long-term capital gains against the long-term capital gains on listed shares, but that is not the case. So. The benefit of indexation is available only for the limited purpose of calculating the tax liability in respect of long-term capital gains arising from the sale of land or building of an individual or of a HUF acquired by a HUF. Yet, it is not available for calculating long-term capital gains for other purposes such as claiming exemption under Section 54 or 54EC or offsetting long-term losses of one asset against another asset.
So while your tax liability in respect of the sale of your home will be zero, the long-term capital gains on the sale of listed shares will require you to pay tax at a flat rate of 12.50% after the initial 1.25%. lakh, to which the zero rate should be applied without any adjustment for indexed long-term capital gains on the sale of your house.
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Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and @jainbalwant on his X handle.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We recommend that investors consult certified experts before making any investment decisions.
