According to the clarification, for properties acquired before 2001, taxpayers are allowed to consider the fair market value (FMV) of the property as of April 1, 2001, as the acquisition cost for LTCG calculations. This adjustment is intended to ensure that taxpayers benefit from a more accurate reflection of property value at the time of acquisition, aligning with updated tax regulations.

Previously, calculating LTCG involved considering the actual purchase price, which often led to discrepancies due to significant appreciation in property values over the years. The new guideline simplifies the process by allowing the use of FMV as of 2001, thus providing a more equitable approach to determining capital gains.

Taxpayers must, however, provide appropriate documentation and evidence to substantiate the FMV of the property as of April 1, 2001. This clarification is expected to reduce disputes and enhance transparency in the taxation process for long-term capital gains.

The IT Department's updated directive is aimed at facilitating smoother compliance and addressing concerns related to the taxation of older real estate transactions. This change is part of ongoing efforts to make tax regulations more user-friendly and efficient.