Debate Ignites Over End of Indexation Benefit on Property Sale
The removal of indexation benefit on property sale has sparked a heated debate, with officials claiming it will benefit most taxpayers, but industry experts argue it will lead to higher frequency of secondary market real estate sales.
Property SaleIndexation BenefitCapital Gains TaxReal EstateBudget 2024Real EstateJul 24, 2024
According to government officials, the new tax rate without indexation is beneficial when a property has appreciated 1.7 times or more for a five-year holding period, 2.4 times or more for a ten-year holding period, and 4.9 times or more for properties purchased in 2009-10. They argue that nominal real estate returns are generally in the region of 12-16% per annum, much higher than inflation, and therefore, substantial tax savings are expected for a vast majority of taxpayers.
Real estate industry experts, on the other hand, argue that if rationalization across asset classes was the objective, parity should have been restored for all applicable taxes and not just capital gains taxes. They point out that stamp duty on resale is 5-7% of property value, as opposed to 0.1% securities transaction tax (STT) in India, highlighting the lack of parity on the taxation front.
The debate raises questions about the impact of the new tax regime on the real estate sector and whether it will achieve its intended objective of simplifying the tax structure. As the industry continues to grapple with the implications of the proposal, one thing is clear - the end of indexation benefit on property sale has sparked a heated debate that is far from over.
Frequently Asked Questions
What is the new tax rate for long-term capital gains on property?
The new tax rate for long-term capital gains on property is 12.5% without indexation benefit.
How will the removal of indexation benefit affect real estate investors?
According to industry experts, it may lead to higher frequency of secondary market real estate sales as people will not want to hold onto assets beyond 3-5 years, leading to increased use of cash in property transactions.
Is the new tax regime beneficial for all taxpayers?
Government officials argue that it is beneficial in most cases, especially for properties held for shorter durations. However, industry experts counter that it will result in higher taxes for long-term investors.
What is the current stamp duty on resale in India?
The current stamp duty on resale in India is 5-7% of property value.
What is the securities transaction tax (STT) in India?
The securities transaction tax (STT) in India is 0.1%.
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