Government Proposes LTCG Tax Amendment for Real Estate Transactions
The government has moved an amendment to the Finance Bill 2024, allowing taxpayers to choose between a 12.5% LTCG tax rate without indexation or a 20% rate with indexation for properties acquired before July 23, 2024.
Ltcg TaxReal Estate TransactionsFinance Bill 2024Indexation BenefitLong Term Capital GainsReal EstateAug 06, 2024
This decision was made in response to the announcement made by Finance Minister Nirmala Sitharaman during the Union budget presentation. She had slashed the LTCG tax rate to 12.5% from 20%. However, the indexation benefit on real estate transactions for properties bought in and after 2001 was scrapped.
As per the proposed amendment, taxpayers can now compute their taxes under both the new and old schemes and pay the lower of the two. Indexation adjusts the purchase price of an asset for inflation, thereby reducing the gains and ultimately the tax liability.
According to Mukul Bagla, Chair of the Direct Tax Committee at PHD Chamber of Commerce and Industry (PHDCCI), the Finance Minister has rationalised the provisions of taxation of capital gain on the real estate sector in the Finance Bill 2024. However, the Bill has denied the benefit of indexation of the cost with respect to all transactions taking place after July 23, 2024.
This move is expected to bring relief to taxpayers who were affected by the earlier decision.
Frequently Asked Questions
What is the proposed LTCG tax amendment for real estate transactions?
The proposed amendment allows taxpayers to choose between a 12.5% LTCG tax rate without indexation or a 20% rate with indexation for properties acquired before July 23, 2024.
Why was the LTCG tax rate slashed from 20% to 12.5%?
The LTCG tax rate was slashed to provide relief to taxpayers and stimulate economic growth.
What is indexation and how does it affect LTCG tax liability?
Indexation adjusts the purchase price of an asset for inflation, thereby reducing the gains and ultimately the tax liability.
Which properties are eligible for the proposed LTCG tax amendment?
Properties acquired before July 23, 2024, are eligible for the proposed LTCG tax amendment.
Who is expected to benefit from the proposed LTCG tax amendment?
Taxpayers who were affected by the earlier decision to scrap the indexation benefit on real estate transactions are expected to benefit from the proposed amendment.
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