Budget 2024: New Tax Proposal Brings Relief to Real Estate Investors
The income tax department clarifies that the new tax proposal without indexation is beneficial for most real estate investors, with nominal returns of 12-16% per annum.
Budget 2024Real EstateIncome TaxTax ProposalIndexationReal Estate PuneJul 24, 2024
According to the income tax department, nominal real estate returns are generally in the region of 12-16% per annum, much higher than inflation, which is around 4-5%. This means that substantial tax savings are expected for a vast majority of taxpayers.
The department has provided examples of how the new proposal would benefit taxpayers. For properties held for five years, the new regime will be beneficial if the property price has appreciated 1.7 times or more. If a property is held for 10 years and has appreciated 2.4 times or more, the new tax regime will be beneficial for the taxpayer. Similarly, if a property is bought in 2009-10 and the value has increased to 4.9 times or more, the new tax proposal will be beneficial for taxpayers.
However, the department admits that if the per annum return on property price is less than 9-11%, the earlier tax rate of 20% with indexation will be beneficial.
The simplification of the tax structure is also expected to bring benefits of ease of compliance in computing taxes, filing, and maintaining records. The new proposal has removed the differential rates of taxes for various asset classes, making it easier for taxpayers to understand and comply with the tax laws.
Overall, the new tax proposal is welcome news for real estate investors, who can expect substantial tax savings and simplified tax compliance.
Frequently Asked Questions
What is the proposed new tax rate for real estate investments?
The proposed new tax rate is a flat 12.5% tax without indexation.
How do nominal real estate returns compare to inflation?
Nominal real estate returns are generally in the region of 12-16% per annum, much higher than inflation, which is around 4-5%.
What are the benefits of the new tax proposal for real estate investors?
The new proposal is expected to bring substantial tax savings and simplified tax compliance for real estate investors.
When will the new tax regime be beneficial for taxpayers?
The new tax regime will be beneficial for taxpayers if the property price has appreciated 1.7 times or more for properties held for five years, 2.4 times or more for properties held for 10 years, and 4.9 times or more for properties bought in 2009-10.
What are the benefits of simplification of the tax structure?
The simplification of the tax structure is expected to bring benefits of ease of compliance in computing taxes, filing, and maintaining records.
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