FINANCE ACT 2024 · PROPERTY LTCG

Finance Act 2024 — The LTCG Change and Why the Section 55(2)(b) Certificate Matters More Than Ever

The Finance Act 2024, effective from 23 July 2024, modified the Long Term Capital Gains (LTCG) tax treatment for property sold on or after that date. For eligible assets acquired before 23 July 2024, the transitional framework requires consideration of both tax computation methods.

55(2)(b)

The historical FMV anchor

For eligible pre-1 April 2001 property, the 1 April 2001 FMV can become the acquisition-cost reference for the indexed computation.

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LTCG FRAMEWORK

STANDARD RATE 12.5% Without indexation

TRANSITIONAL METHOD 20% With CII indexation

Pre-23 July 2024 acquisitions Compare the applicable methods under the transitional framework.

01 · WHAT CHANGED

Finance Act 2024: Two LTCG Computation Paths

The Finance Act 2024 changed the standard LTCG rate for property sold on or after 23 July 2024 while introducing a transitional comparison for eligible assets acquired before that date.

A WITH INDEXATION

Method A

20% × Indexed Capital Gain

20% × (Sale Consideration − Indexed Cost of Acquisition)

Indexed Cost of Acquisition is calculated using the acquisition cost and the applicable Cost Inflation Index (CII).

For pre-1 April 2001 property: The relevant acquisition-cost reference can be the FMV as on 1 April 2001 supported by a Section 55(2)(b) valuation.

B WITHOUT INDEXATION

Method B

12.5% × Unindexed Capital Gain

12.5% × (Sale Consideration − Acquisition Cost)

The lower statutory rate is applied to a larger capital-gain base because indexation is not applied.

Transitional comparison: For eligible pre-23 July 2024 acquisitions, the two applicable computations can be compared under the supplied framework.

23 July 2024 Effective date of the Finance Act 2024 LTCG change described in this framework.

55 (2)(b) PROPERTY FMV

THE SECTION 55(2)(b) ANCHOR

Why the 1 April 2001 FMV Can Change the Method A Calculation

For property acquired before 1 April 2001, the acquisition cost used for the indexed computation can be based on the Fair Market Value as on 1 April 2001 rather than the original purchase price, subject to the applicable tax provisions.

This substitution can materially increase the acquisition-cost base used for indexation. A properly supported Section 55(2)(b) Government Approved Property Valuer certificate therefore becomes an important document for the Method A computation for eligible pre-2001 property.

FMV

1 April 2001 Historical Valuation

The valuation establishes the relevant historical FMV through property assessment, available market evidence and an appropriate valuation methodology.

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THE VALUATION DOCUMENT

The Section 55(2)(b) Certificate Connects Property FMV to the Tax Computation

Establish the Historical Property FMV

Determine the applicable Fair Market Value as on 1 April 2001 for eligible pre-2001 property.

Support the Indexed Cost

The supported historical FMV becomes an important input in calculating the indexed cost of acquisition under Method A.

Compare the Applicable Methods

The CA can use the valuation input alongside the applicable tax calculations to compare Method A and Method B.

Maintain Documentary Evidence

A professionally prepared property valuation certificate creates a documented historical valuation basis for the relevant tax computation.

METHOD COMPARISON

Which Method May Produce the Lower Tax?

The applicable calculation depends on the acquisition date, sale date, historical cost, eligible transitional provisions and the resulting computation under each method.

PROPERTY / ACQUISITION CONTEXT COMPUTATION CONSIDERATION

Pre-1 April 2001 Property Historical FMV becomes particularly important.

Method A may benefit from Section 55(2)(b) The 1 April 2001 FMV can materially increase the indexed acquisition-cost base.

Property Acquired Before 23 July 2024 Transitional framework applies where eligible.

Compare Method A and Method B The applicable computations should be calculated separately and compared.

2001–Approximately 2010 Acquisitions Relatively more recent historical acquisition cost.

Method B may be competitive The 12.5% rate without indexation can compete with the 20% indexed computation depending on the figures.

The Government Approved Property Valuer supplies the property valuation input. The CA uses the valuation along with the applicable tax provisions and calculations to determine the relevant comparison for the taxpayer.

PRE-2001 PROPERTY · SECTION 55(2)(b)

Need the 1 April 2001 Property FMV for Your LTCG Computation?

Discuss your property, acquisition history and valuation requirement with the Government Approved Property Valuation practice.

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