Government Mulls Indexation Benefit for Real Estate Transactions
The government is considering proposals to address concerns over the potential negative effects of the indexation removal on the real estate market.
Real EstateIndexation BenefitLong Term Capital Gains TaxLtcgFinance MinistryReal Estate NewsJul 31, 2024
One of the suggestions includes maintaining indexation for properties bought before July 2024. Another proposal recommends a dual long-term capital gains tax regime for realty, wherein taxpayers can choose between 20% tax with indexation or 12.5% tax without indexation.
The government's decision to withdraw indexation benefits has raised concerns among real estate stakeholders, who argue that it will have a significant impact on properties where the sale price is less than the indexed cost. Such cases, which were previously tax-free, will now be subject to 12.5% LTCG.
The finance ministry is considering these requests, but no decision has been taken yet. According to sources, the government is looking at these proposals to allay the impact of indexation removal on real estate.
Raman Aggarwal, Area Chair — Banks & Non-Banks, Council for International Economic Understanding (CIEU), said,
Frequently Asked Questions
What is indexation benefit in real estate?
Indexation benefit is a tax exemption on the inflation-adjusted value of a property.
Why is the government considering removing indexation benefits?
The government is considering removing indexation benefits to lower long-term capital gains (LTCG) tax from 20% to 12.5%.
What is the impact of removing indexation benefits on real estate?
Removing indexation benefits will have a significant impact on properties where the sale price is less than the indexed cost, making them subject to 12.5% LTCG.
What are the proposals being considered by the government?
The government is considering proposals to maintain indexation for properties bought before July 2024 and a dual long-term capital gains tax regime for realty.
What is the current long-term capital gains tax rate on real estate?
The current long-term capital gains tax rate on real estate is 20%, but the government has proposed to lower it to 12.5%.
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