The 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 had proposed to end indexation benefits for homeowners.
This was the proposal 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 entire profit amount, not on 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 the 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 heavy tax burden on taxpayers and an increase in illegal financial activities in property deals.
Industry people expressed gratitude
Dr. Niranjan Hiranandani, Chairman of Hiranandani Group and President of NAREDCO, has praised the Finance Minister for the proposed amendments in the Finance Bill, which have brought significant tax relief to the real estate sector. Dr. Hiranandani said, “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 to the Finance Minister for his farsighted approach in implementing these beneficial measures.”