The move follows concerns among middle class and other property owners that they would be disadvantaged under the new regime which does away with indexation benefit, meant to adjust for inflation, while lowering the tax rate from 20% to 12.5% as part of an exercise to ensure that all asset classes face the same levy instead of multiple rates.
Although tax authorities as well as Sitharaman had sought to allay fears and argued that people won’t be worse off under new dispensation, the govt chose to remove an irritant in a budget welcomed on most other counts. Several experts had argued that changes would impact older properties more.
The change in capital gains tax formula for real estate almost ended up burying the gain of Rs 17,500 that would accrue to taxpayers with following the change in slabs under the new tax regime.
‘Govt allows you to choose best realty tax option’
Sudhir Kapadia, senior adviser, tax and regulatory services, at consulting firm EY India, said, “Govt has given even better relief and allowed people to choose what is best for them. It has sought to ensure that under no circumstance is anyone worse off.”
In recent years govt has opted to “grandfather” tax changes, allowing the new rules to apply prospectively, but this was one rare instance of the Centre seeking to implement changes which did not give individuals time to adjust, especially in an asset class where there is a time lag between the time a transaction is executed and the actual registration of the sale deed.
“By enabling taxpayers to choose the lower tax burden between the new and old schemes, the amendment is poised to drive investment and enhance sales across housing segments. We are grateful for the FM’s forward-thinking approach in implementing these beneficial measures,” said Niranjan Hiranandani, chairman of the Hiranandani Group and NAREDCO, the industry lobby group.
Separately, govt will also provide that unlisted securities or shares sold between April 1 and July 23, 2024 will attract 10% tax and that only after July 23 will the new rate of 12.5% capital gains be implemented.