Changes in Capital Gains Taxation Proposed in Union Budget 2017-18
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20 April 2017 - 4:16, by , in Current News, No comments
  1. The Union Budget 2017-18 has reduced the stipulated time period to hold a property in order to avail the benefit of a flat tax rate of 20% on Long Term Capital Gain to 2 years from 3 years.
  2. It has also been proposed to shift base year from 1981 to 2001 for calculation of the indexation benefit.
  3. Cost Indexation takes inflation into account and helps in increasing the cost of acquisition.
  4. Calculation at Fair Market Value of 2001 as opposed to 1981 would increase the cost of acquisition, thereby lowering the Capital Gains.
  5. The reason for change in base year is to align the inflation in property prices during 1982 to 2001.
  6. Steps to Calculate Tax on Capital Gain:
    • Cost Inflation Index (CII) = CII for the year the asset was transferred or sold / CII for the year the asset was acquired or bought
    • Indexed Cost of Acquisition = Cost of Acquisition x CII
    • Capital Gain on Sale of Property = Selling Price – Indexed Cost of Acquisition
    • Tax on Capital Gain = 20% x Capital Gain
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