Budget 2024: Know All About Stamp Duty And Interest On LTCG Home Loan

In Budget 2024, the tax on long-term capital gains (LTCG) from the sale of property has been reduced from 20% to 12.5%. The indexation benefit available to taxpayers in determining the acquisition cost has been removed. Another aspect that worries property owners is the growing discussion on the removal of the inclusion of stamp duty and home loan interest in the acquisition cost of the property for calculating capital gain. Taxpayers took to social media platforms to express their concerns about how property prices will be calculated under the Budget Bill 2024 to determine long-term capital gains. Will the Finance Bill 2024 change the rule for calculating the base price of the property?

Currently, stamp duty and registration fees are usually included in the cost of the property while calculating capital gains. Similarly, interest payments on a home loan over the annual deduction of Rs 2 lakh are often added to the cost of the property, based on judicial precedents for calculating capital gains, says Deep Chandan, Executive Director, Katalyst Advisors.

The Finance Bill, 2023 has introduced a significant amendment to Section 48 of the Income Tax Act, 1961 with effect from 1 April 2024. This amendment represents a departure from the previous legal opinion of various courts and high courts regarding the treatment of interest on capital borrowed for the acquisition of immovable property.

In the past, the jurisprudence had held that interest on loans borrowed for the acquisition of immovable property can be considered as part of the acquisition cost. The recent amendment specifically excludes such interest from the calculation of acquisition or improvement costs for capital gains purposes.

The amended clause (ii) of Section 48 now contains the following proviso: “Provided that the acquisition cost of the asset or the cost of improvement thereof shall not include the deductions claimed against the amount of interest under clause (b) of Section 24 or the provisions of Chapter VIA.”

This amendment removes the inclusion of interest for which the deductions were effectively excluded from the calculation of capital gains.