Interestingly, the Union Budget 2018 made two small changes. It shifted residential property and unlisted shares to the category of 24 months definition for classification of long term versus short term capital asset. Let us take the instance of Dipti who is a salaried employee in a reputed private sector company. In the month of September, 2015 she purchased a 2 BHK apartment in Noida and sold the same in July, 2018 at a profit of Rs.7 lakhs, as she was transferred to Mumbai. How will these gains be taxed in her case?

In this case, residential house is sold in financial year 2018-19 corresponding with assessment year 2019-20. Hence, as per the new definition, the period of holding for an immovable property to be considered as 24 months instead of 36 months to determine LTCG. In this case, the gains will be treated as LTCG and taxed accordingly. Effectively, Dipti will have to pay tax at 20% of the indexed gains based on the applicable cost inflation index (CII) that is applicable to the purchase and sale years.