Government Proposes Amendment to LTCG Tax on Real Estate Transactions
The government has introduced a change to the Long-Term Capital Gains (LTCG) tax on real estate transactions, scrapping the indexation benefit for properties bought in and after 2001.
Ltcg TaxReal Estate TransactionsIndexation BenefitCapital Gains TaxProperty OwnersReal EstateAug 06, 2024
This decision is likely to impact property owners who were looking to sell their properties and avail the indexation benefit to reduce their tax liability.
The LTCG tax is levied on the gains made from the sale of a capital asset, such as a property, that has been held for a period of more than two years. The indexation benefit allows tax payers to adjust the cost of acquisition of the property to reflect the impact of inflation.
However, with the scrapping of the indexation benefit, tax payers will now have to pay LTCG tax without adjusting for inflation. This is likely to increase the tax liability for property owners.
The government has stated that the amendment is intended to bring parity between the LTCG tax on real estate and other capital assets. The change is expected to be implemented from the next financial year.
The proposed amendment has received mixed reactions from the real estate industry, with some experts welcoming the move and others expressing concerns about its impact on the sector.
The Long-Term Capital Gains (LTCG) tax was introduced in the 2018 budget to tax the gains made from the sale of capital assets, such as properties, that have been held for a period of more than two years. The government of India has been taking measures to rationalize the tax structure and bring parity between different tax regimes.
Frequently Asked Questions
What is LTCG tax?
LTCG tax is a tax levied on the gains made from the sale of a capital asset, such as a property, that has been held for a period of more than two years.
What is indexation benefit?
Indexation benefit allows tax payers to adjust the cost of acquisition of a property to reflect the impact of inflation.
Why has the government scrapped the indexation benefit on real estate transactions?
The government has stated that the amendment is intended to bring parity between the LTCG tax on real estate and other capital assets.
How will the amendment impact property owners?
Property owners will now have to pay LTCG tax without adjusting for inflation, which is likely to increase their tax liability.
When is the amendment expected to be implemented?
The change is expected to be implemented from the next financial year.
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