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There are few minor changes in the latest direct tax code on account of capital gains tax on sale of a house. Lets us brief you about the existing as well as new laws:

Capital gains arises in case of transfer or sale of a house from one person to another. Currently, Capital gains tax is computed on the indexed cost of the house purchased, which is deducted from the consideration received by the assessee. The indexed cost is computed according to the indexation rates notified by the Income Tax Department for each year.

Under the existing tax laws, sale of asset before three years of purchase is considered under "short term gain" tax and after three years of purchase is considered under "long term gain" tax. Under the latest direct tax code, any gain or loss made on the sale of an asset within a year of purchase will be taxed under short term gain tax. The gain or loss made will be factored in the income and taxed according to the income tax slabs of the assessee.

Under the new direct tax code, any gain or loss made on the sale of an asset after one year of purchase is liable for long term capital gains tax. Instead of indexation benefit, the code has introduced the concept of discounting based on which long-term capital gains will be calculated.

It has also revised the base date for determining the cost of acquisition. As such, from April 1, 2011, April 1, 2000 will be considered for calculating the discount rate and not April 1, 1981, which is used currently. This is good news for those who have invested in property years ago, as the unrealised capital gains on such assets between April 1981 and April 2000 will not be taxed.

Earlier, long-term gains were taxed at a flat rate of 20 percent after indexing it for inflation. However, now it will be added to your income after indexation and be taxed at the marginal tax rate - the rate will be dependent on the tax bracket one is in. In case one is in the 30 percent tax bracket, the gains will be taxed at 30 percent. This will not be beneficial to most people as after the sale of a property, most would tend to fall under 30 percent bracket. However, the earlier relief of escaping long term capital gain tax by either investing in another property or investing in a long term government specified infrastructure bonds is expected to continue. But those needing money after selling the property will have to pay more if they fall under 30 percent bracket.

So, the new direct tax code is a mixed bag for investors.

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