For real estate properties purchased before 2001, the cost of acquisition for calculating long-term capital gains (LTCG) tax will be either the fair market value (FMV, not exceeding the stamp duty value) as of April 1, 2001, or the actual cost of the land or building.

The indexation benefit allows taxpayers to compute gains from the sale of capital assets after adjusting for inflation. For properties purchased before 2001, the FMV (not exceeding the stamp duty value) can be used as the base to determine the indexed price. The indexed price is then deducted from the sale price to calculate LTCG, which is taxed at 20%.

For properties acquired prior to April 1, 2001, the cost of acquisition as of that date is defined as either the original cost to the owner or the FMV of the property (subject to the stamp duty limit).

For example, if the sale price is ?1 crore and the indexed cost of acquisition is ?36.3 lakh, the LTCG would be ?63.7 lakh, and the tax at 20% would amount to ?12.74 lakh.

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