For 12.5% tax on property sales, should we use purchase price or value on 1st April 2001?

Last Updated on October 24, 2024 at 9:50 am

In response to our article, Real Estate Taxation Example After Finance Bill 2024 Amendment, a reader asks, “Does the Financial Bill clearly mention that for capital gains taxation at the new 12.5% rate, the cost of acquisition for the property will be the value of the property on April 1, 2001 and not the actual purchase price before 2001? Want to be sure about this aspect.” Tax expert Manmohan Sethumadhavan who recently published Capital Gains Taxation Rules Ready Reckoner responds.

About the author: Manmohan Sethumadhavan is a freelancer, investor, and personal finance enthusiast “in search of the absolute truth.” You can follow Manu on Twitter @ManuTsr. Also, read his articles:

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The indexation to cost of acquisition was enabled by the 2nd Proviso to Section 48 in the finance bill. The indexation was limited by the new amendment to properties sold before 23rd July only.

Section 55(2)(b) defines the cost of acquisition.
(i) where the capital asset became the property of the assessee before the 1st day of April 2001, means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1st day of April 2001, at the option of the assessee ;
This was untouched.

So, a person can choose between the actual cost or FMV of 2001, whichever is beneficial. This also applies to the new 12.5% rate cases.