This article helps you calculate the minimum price above which you must sell your property to pay lower taxes under the taxation rule change as per Budget 2024.
This article is a part of our detailed article series on Union Budget 2024. Ensure you have read the other parts here:
This article shows you the method for lowering the effect of Tax Collected at Source (TCS) on foreign remittances and travel via RBI’s Liberalised Remittance Scheme (LRS) as per new rules introduced under Union Budget 2024.
This article analyses the changes in Budget 2024 that impact investors investing abroad under the RBI’s Liberalised Remittance Scheme.
This article shows how you can now offset TCS against your salary’s TDS providing significant relief and improving your cash flow.
This article explains the new of the reversal of the 12.5% without indexation tax rule to allow 20% with indexation for all properties bought before 23rd July 2024.
This article clarifies the indexation benefit available to property purchased before 2001 from official income tax authority sources.
This article discusses the impact on investors’ psyche due to impact on Gold price due to government policy change.
This article shows you how debt, international and gold/silver mutual funds will get taxed as per the new capital gains tax declared in the Union Budget 2024.
This article shows you how to do tax harvesting for shares and mutual funds as per the new capital gains tax declared in the Union Budget 2024.
This article analyses the most important changes affecting your portfolio as per the Union Budget 2024.
This article analyses the change in taxation of stocks and mutual funds as per the Union Budget 2024.
This article analyses the change in NPS-related tax deductions as per the Union Budget 2024.
This article describes how to use the Arthgyaan goal-based investing tool as a calculator to determine if switching to the New Tax Regime makes sense from 1st April 2024.
This article analyses the change in taxation of real estate sales in India as per Union Budget 2024.
In a surprise move, Union Budget 2024 changed the capital gains taxation rules for real estate transactions:
The only things kept unchanged are:
Read more on the changes introduced here: Budget 2024: A Surprise in Real Estate Sales due to Indexation Benefit Removal: Is it good or bad?
Note: In another surprise amendment to the Finance Bill on 6th August, 2024, the option of paying 20% tax on gains with indexation has been added to all properties acquired before Union Budget 2024 speech date of 23rd July, 2024. This means that for all such properties, including those purchased before 1st April 2001, the capital gains tax can be the lower of:
irrespective of the sale date thereby offering a grandfathering option for such properties. The exact amendment is this:
“where the income-tax computed .. 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 will be ignored;”
If you read the text of the amendment carefully, then any loss cannot be offset or carried forward here since the amendment does not talk about losses. For properties acquired on or after 23rd July 2024, only the new 12.5% without indexation rule will apply.
We have covered the impact of this new change in detail here: Budget 2024 taxation rule reversal: grandfathering rule brings back indexation benefit to properties acquired before July 2024
Let us declare:
SP = Selling Price of the property
CP = Cost or construction price of the property
Profit_PCT (profit percentage) = SP/CP - 1
Indexation_PCT = CII_sell / CII_buy - 1 where CII comes from here: How to use the Cost Inflation Index (CII): latest value and historical rates
New tax regime as per Budget 2024
Tax = n * (SP - CP) where n = 12.5% or 1/8
or, Tax = n * (SP/CP - 1) * CP
or, Tax = n * Profit_PCT * CP
Old tax regime
Tax = 20% of (SP - I * CP) where I = CII_sell / CII_buy
or, Tax = 20% of (SP/CP - I) * CP
or, Tax = 20% of (Profit_PCT + 1 - I) * CP
or, Tax = 20% of (Profit_PCT + 1 - (Indexation_PCT+1)) * CP, since Indexation_PCT = I - 1
or, Tax = 20% of (Profit_PCT - Indexation_PCT) * CP
So if
Tax_new ≤ Tax_old_with_indexation then
n * Profit_PCT * CP ≤ 20% of (Profit_PCT - Indexation_PCT) * CP
or, n * Profit_PCT ≤ (Profit_PCT - Indexation_PCT) / 5 since 20% = 1/5
or, Profit_PCT * (n-1/5) ≤ - Indexation_PCT / 5
or, Profit_PCT ≥ Indexation_PCT / 5 * (1/5-n) [note the sign flip]
or, Profit_PCT ≥ Indexation_PCT / (1-5n)
With n = 12.5% = 1/8,
Profit_PCT ≥ Indexation_PCT / (1-5/8) or Profit_PCT ≥ 8/3 * Indexation_PCT
or, Profit_PCT ≥ 2.6667 * Indexation_PCT
We can now calculate the factors applicable for different tax rates from 10% to 15% for potential new values of the tax rate that replaces indexation.
| New Tax rate | Factor |
|---|---|
| 10.0% | 2.0000 |
| 11.0% | 2.2222 |
| 12.5% | 2.6667 |
| 14.0% | 3.3333 |
| 15.0% | 4.0000 |
For property sold in FY2024-25 after 23rd July 2024, this table gives the minimum selling price for ₹10 lakh purchased in the year as per this table.
| Age (years) | Purchased in | Inflation change | Min profit % | Price of house |
|---|---|---|---|---|
| 23 | 2001-02 | 263% | 701% | 80.13 |
| 22 | 2002-03 | 246% | 655% | 75.52 |
| 21 | 2003-04 | 233% | 621% | 72.14 |
| 20 | 2004-05 | 221% | 590% | 69.00 |
| 19 | 2005-06 | 210% | 561% | 66.07 |
| 18 | 2006-07 | 198% | 527% | 62.68 |
| 17 | 2007-08 | 181% | 484% | 58.37 |
| 16 | 2008-09 | 165% | 440% | 53.99 |
| 15 | 2009-10 | 145% | 387% | 48.74 |
| 14 | 2010-11 | 117% | 313% | 41.30 |
| 13 | 2011-12 | 97% | 259% | 35.94 |
| 12 | 2012-13 | 82% | 217% | 31.73 |
| 11 | 2013-14 | 65% | 173% | 27.33 |
| 10 | 2014-15 | 51% | 137% | 23.67 |
| 9 | 2015-16 | 43% | 114% | 21.44 |
| 8 | 2016-17 | 38% | 100% | 20.00 |
| 7 | 2017-18 | 33% | 89% | 18.92 |
| 6 | 2018-19 | 30% | 79% | 17.90 |
| 5 | 2019-20 | 26% | 68% | 16.83 |
| 4 | 2020-21 | 21% | 55% | 15.49 |
| 3 | 2021-22 | 15% | 39% | 13.87 |
| 2 | 2022-23 | 10% | 26% | 12.58 |
For a ₹10 lakhs property purchased in FY2006-07, the minimum selling price must be ₹62.68 lakhs or higher to pay the same or lower tax than the old 20%-with-indexation rule.
We will show the tax calculation in the table below. We have rounded up the selling prices to the next lakh to make the calculation clearer.
| Purchased in | Selling Price | Adj CP | Old CG | New CG | Old Tax | New Tax |
|---|---|---|---|---|---|---|
| 2001-02 | 81.00 | 36.30 | 44.70 | 71.00 | 8.94 | 8.88 |
| 2002-03 | 76.00 | 34.57 | 41.43 | 66.00 | 8.29 | 8.25 |
| 2003-04 | 73.00 | 33.30 | 39.70 | 63.00 | 7.94 | 7.88 |
| 2004-05 | 69.00 | 32.12 | 36.88 | 59.00 | 7.38 | 7.38 |
| 2005-06 | 67.00 | 31.03 | 35.97 | 57.00 | 7.19 | 7.13 |
| 2006-07 | 63.00 | 29.75 | 33.25 | 53.00 | 6.65 | 6.63 |
| 2007-08 | 59.00 | 28.14 | 30.86 | 49.00 | 6.17 | 6.13 |
| 2008-09 | 54.00 | 26.50 | 27.50 | 44.00 | 5.50 | 5.50 |
| 2009-10 | 49.00 | 24.53 | 24.47 | 39.00 | 4.89 | 4.88 |
| 2010-11 | 42.00 | 21.74 | 20.26 | 32.00 | 4.05 | 4.00 |
| 2011-12 | 36.00 | 19.73 | 16.27 | 26.00 | 3.25 | 3.25 |
| 2012-13 | 32.00 | 18.15 | 13.85 | 22.00 | 2.77 | 2.75 |
| 2013-14 | 28.00 | 16.50 | 11.50 | 18.00 | 2.30 | 2.25 |
| 2014-15 | 24.00 | 15.13 | 8.88 | 14.00 | 1.78 | 1.75 |
| 2015-16 | 22.00 | 14.29 | 7.71 | 12.00 | 1.54 | 1.50 |
| 2016-17 | 20.00 | 13.75 | 6.25 | 10.00 | 1.25 | 1.25 |
| 2017-18 | 19.00 | 13.35 | 5.65 | 9.00 | 1.13 | 1.13 |
| 2018-19 | 18.00 | 12.96 | 5.04 | 8.00 | 1.01 | 1.00 |
| 2019-20 | 17.00 | 12.56 | 4.44 | 7.00 | 0.89 | 0.88 |
| 2020-21 | 16.00 | 12.06 | 3.94 | 6.00 | 0.79 | 0.75 |
| 2021-22 | 14.00 | 11.45 | 2.55 | 4.00 | 0.51 | 0.50 |
| 2022-23 | 13.00 | 10.97 | 2.03 | 3.00 | 0.41 | 0.38 |
Of course, you can save as part of this tax by investing up to ₹50 lakhs in Section 54EC capital gains bonds: How Section 54EC helps you save tax when you sell property.
The Cost Inflation Index (CII), given what the values are, is only used as an inflation proxy in capital gains calculation (table below). It is not to be used for actual inflation values.
| Serial # | Financial Year | CII | %ch | Worth of ₹1000 |
|---|---|---|---|---|
| 1 | 2001-02 | 100 | 0.00% | 1000 |
| 2 | 2002-03 | 105 | 5.00% | 952 |
| 3 | 2003-04 | 109 | 3.81% | 917 |
| 4 | 2004-05 | 113 | 3.67% | 885 |
| 5 | 2005-06 | 117 | 3.54% | 855 |
| 6 | 2006-07 | 122 | 4.27% | 820 |
| 7 | 2007-08 | 129 | 5.74% | 775 |
| 8 | 2008-09 | 137 | 6.20% | 730 |
| 9 | 2009-10 | 148 | 8.03% | 676 |
| 10 | 2010-11 | 167 | 12.84% | 599 |
| 11 | 2011-12 | 184 | 10.18% | 543 |
| 12 | 2012-13 | 200 | 8.70% | 500 |
| 13 | 2013-14 | 220 | 10.00% | 455 |
| 14 | 2014-15 | 240 | 9.09% | 417 |
| 15 | 2015-16 | 254 | 5.83% | 394 |
| 16 | 2016-17 | 264 | 3.94% | 379 |
| 17 | 2017-18 | 272 | 3.03% | 368 |
| 18 | 2018-19 | 280 | 2.94% | 357 |
| 19 | 2019-20 | 289 | 3.21% | 346 |
| 20 | 2020-21 | 301 | 4.15% | 332 |
| 21 | 2021-22 | 317 | 5.32% | 315 |
| 22 | 2022-23 | 331 | 4.42% | 302 |
| 23 | 2023-24 | 348 | 5.14% | 287 |
| 24 | 2024-25 | 363 | 4.31% | 275 |
We can now calculate the actual minimum profit percentage for selling the property based on the inflation values, implied from CII, and create the table below:
The chart below shows the split of inflation change and profit percentage. It calculates the excess returns over inflation like this:
To understand whether it is the right price to sell your property:
Whether the investor will get this minimum return when selling the property will be another consideration. If the property price is not appreciating enough then there might be a case of exiting that unit and reinvesting in a better-performing unit.
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This post titled 10L to 80L in 23 Years: How to Calculate Sale Price of Property to Pay Lower Taxes after Budget 2024 first appeared on 29 Jul 2024 at https://arthgyaan.com
