Government has given a big relief to the taxpayers. The government has introduced an amendment under which taxpayers can choose either a non-indexed long term capital gains tax (LTCG) rate of 12.5% or an indexed rate of 20% on property purchased before July 23, 2024. According to a report by ET Now, this has been included in the list of amendments in the Finance Bill. The Center’s move comes after the response received from the real estate sector. Stakeholders had warned the government that the proposal to remove indexation benefits on long term capital gains tax in real estate would affect the growth of the sector. In Budget 2024 presented by Finance Minister Nirmala Sitharaman, the government proposed to eliminate indexation benefits for homeowners.
This was proposed in the budget
The proposed change in Budget 2024 means that homeowners who make a profit from selling a property will now have to pay tax on the full profit amount, not the inflation adjusted profit. Indexation is used to adjust the purchase price of an investment to reflect the effect of inflation on it. Previously, indexation benefits allowed homeowners to increase the cost base of a property to take into account the effect of inflation, thereby reducing the net profit and the associated tax liability. The elimination of indexation has raised fears of a heavier tax burden on taxpayers and an increase in illegal financial activities in property deals.
People of the industry expressed gratitude
Dr. Niranjan Hiranandani, Chairman, Hiranandani Group and President, NAREDCO has lauded the Finance Minister for the amendments proposed in the Finance Bill, which provide significant tax relief to the real estate sector. “The government’s initiative, under which taxpayers are given the option to calculate tax on real estate transactions either at 12.5% without indexation or 20% with indexation, is a significant step. This relief applies to the transfer of long-term capital assets such as land or building acquired before July 23, 2024. We are grateful for the visionary approach of the Finance Minister in implementing these beneficial measures,” Dr. Hiranandani said.
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