Big Relief for Home Buyers: Centre Revises LTCG Indexation on Real Estate
The government has amended the Long-Term Capital Gains (LTCG) regime for real estate, providing relief to home buyers.
LtcgReal EstateTax ReliefHome BuyersIndian GovernmentReal EstateAug 06, 2024
This flexibility in the grandfathering provision will apply to all property transactions finalized prior to the Budget's presentation on July 23. Individuals or Hindu Undivided Families (HuFs) can compute their taxes under both schemes and pay the lower amount.
The revised regulations were announced through an amendment to the Finance Bill 2024. The changes aim to provide substantial relief on long-term capital gains for immovable property. The flexibility in the grandfathering provision stands as a measure that applies to all property transactions finalized prior to the Budget's presentation.
The amendment states that in the case of 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.
In the Union Budget 2024, Finance Minister Nirmala Sitharaman made significant tax-related announcements. One of the key changes involved the removal of indexation benefits for real estate transactions and the reduction of long-term capital gains (LTCG) tax from 20% to 12.5%.
Indexation, which accounts for inflation by adjusting the purchase price of an asset, serves to lower gains and, consequently, decrease the individual's tax obligations.
The updated regulations will come into effect on July 23, 2024. It's essential to note that properties acquired before 2001 will continue to benefit from indexation. This means that only recent acquisitions will be subject to the new rules. If you complete any transactions before the mentioned date, they will not be impacted by the new regulations.
Before the Budget 2024, indexation benefits helped homeowners to increase the property's cost basis to account for inflation, thereby reducing the net profit and the associated tax liability.
In the recent Union Budget, FM Sitharaman made notable changes to the New Tax Regime. The Standard Deduction, which was raised to Rs 75,000 in the new tax structure. Additionally, revisions were made to the tax slabs under the new regime.
Furthermore, the securities transaction tax (STT) applicable to futures and options saw an increase, with the rates for the sale of options in securities rising from 0.0625% to 0.1% of the option premium and for futures from 0.0125% to 0.02%.
Noteworthy among the alterations was the adjustment in the capital gains tax for shares and stocks, which surged from 10% to 12.5%. This elevation translates to a reduction in post-tax returns by 2.5%.
About the Ministry of Finance
The Ministry of Finance is responsible for the economic and financial well-being of the country. The ministry is headed by the Finance Minister, who is responsible for presenting the Union Budget and making key financial decisions.
The Central Board of Direct Taxes (CBDT) is a part of the Department of Revenue in the Ministry of Finance, Government of India. The CBDT provides inputs for policy and planning of direct taxes in India and is also responsible for the administration of direct tax laws through the Income Tax Department.
Tags LTCG, Real Estate, Tax Relief, Home Buyers, Indian Government.
FAQs
Q What is the revised LTCG tax rate for real estate transactions?
A The revised LTCG tax rate for real estate transactions is 12.5% without indexation or 20% with indexation for properties acquired before July 23, 2024.
Q Will properties acquired before 2001 be affected by the new regulations?
A No, properties acquired before 2001 will continue to benefit from indexation.
Q What is the grandfathering provision in the revised regulations?
A The grandfathering provision allows taxpayers to compute their taxes under both schemes and pay the lower amount.
Q What is the effective date of the revised regulations?
A The revised regulations will come into effect on July 23, 2024.
Q Will the new regulations affect transactions completed before the mentioned date?
A No, transactions completed before the mentioned date will not be impacted by the new regulations.
Frequently Asked Questions
What is the revised LTCG tax rate for real estate transactions?
The revised LTCG tax rate for real estate transactions is 12.5% without indexation or 20% with indexation for properties acquired before July 23, 2024.
Will properties acquired before 2001 be affected by the new regulations?
No, properties acquired before 2001 will continue to benefit from indexation.
What is the grandfathering provision in the revised regulations?
The grandfathering provision allows taxpayers to compute their taxes under both schemes and pay the lower amount.
What is the effective date of the revised regulations?
The revised regulations will come into effect on July 23, 2024.
Will the new regulations affect transactions completed before the mentioned date?
No, transactions completed before the mentioned date will not be impacted by the new regulations.
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