Budget 2024 indexation relief: The government has provided a significant relief to taxpayers by introducing an amendment that allows them to choose between a 12.5% long-term capital gains (LTCG) rate without indexation or a 20% rate with indexation for properties acquired before July 23, 2024.
This development was included in the list of amendments to the Finance Bill, as reported by ETNow, and comes in response to the backlash faced by the government from the real estate sector.
“Major relief proposed in the Finance Bill in respect of taxation of immovable property. In the case of the transfer of a long-term capital asset, being land or building or both, by an individual or HuF, which is acquired before the 23rd day of July 2024, the taxpayer can compute his taxes under the new scheme [12.5% without indexation] and old scheme [20% with indexation] and pay such tax which is lower of the two,” reported ANI.
The stakeholders had warned that the proposal to remove indexation benefits for long-term capital gains in real estate would adversely affect the sector’s growth.
In the Budget 2024 presented by Finance Minister Nirmala Sitharaman, the government had proposed eliminating indexation benefits for homeowners. This change would have required homeowners who profit from selling their property to pay tax on the entire profit amount, rather than on the inflation-adjusted profit. Indexation is a method used to adjust the purchase price of an investment to account for the effect of inflation.
The elimination of indexation had raised concerns about a significant tax burden for taxpayers and the potential for increased illicit financial activities in property deals.
However, the Income Tax department has dismissed such claims and described the move as ‘advantageous’. Earlier, ET had reported that a higher tax rate with indexation or a lower rate of 12.5% without indexation, as well as some form of grandfathering for ancestral properties, were being considered. The finance ministry has held discussions on the concerns raised and will consult with the Prime Minister’s Office regarding the matter.
This development was included in the list of amendments to the Finance Bill, as reported by ETNow, and comes in response to the backlash faced by the government from the real estate sector.
“Major relief proposed in the Finance Bill in respect of taxation of immovable property. In the case of the transfer of a long-term capital asset, being land or building or both, by an individual or HuF, which is acquired before the 23rd day of July 2024, the taxpayer can compute his taxes under the new scheme [12.5% without indexation] and old scheme [20% with indexation] and pay such tax which is lower of the two,” reported ANI.
The stakeholders had warned that the proposal to remove indexation benefits for long-term capital gains in real estate would adversely affect the sector’s growth.
In the Budget 2024 presented by Finance Minister Nirmala Sitharaman, the government had proposed eliminating indexation benefits for homeowners. This change would have required homeowners who profit from selling their property to pay tax on the entire profit amount, rather than on the inflation-adjusted profit. Indexation is a method used to adjust the purchase price of an investment to account for the effect of inflation.
The elimination of indexation had raised concerns about a significant tax burden for taxpayers and the potential for increased illicit financial activities in property deals.
However, the Income Tax department has dismissed such claims and described the move as ‘advantageous’. Earlier, ET had reported that a higher tax rate with indexation or a lower rate of 12.5% without indexation, as well as some form of grandfathering for ancestral properties, were being considered. The finance ministry has held discussions on the concerns raised and will consult with the Prime Minister’s Office regarding the matter.