The Income Tax Department has issued a clarification regarding the acquisition cost of real estate purchased before 2001 for long-term capital gains (LTCG) calculations. This new guideline allows taxpayers to use the fair market value (FMV) of the property as of April 1, 2001, instead of the actual purchase price. The adjustment aims to address discrepancies caused by significant property value appreciation over the years and streamline the LTCG calculation process.
Previously, taxpayers had to consider the original purchase price, which often did not reflect the property's current value due to substantial appreciation. The updated directive simplifies the process by allowing the use of FMV as of 2001, ensuring a more accurate and equitable valuation.
To benefit from this adjustment, taxpayers must provide proper documentation to substantiate the FMV of their property as of April 1, 2001. This move is expected to reduce disputes and enhance transparency in the taxation process for long-term capital gains.
The Income Tax Department's clarification is designed to facilitate smoother compliance and address issues related to the taxation of older real estate transactions. This update is part of broader efforts to make tax regulations more user-friendly and efficient.
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