Government to Revise Capital Gains Formula for Real Estate Investors
The government has announced a proposal to modify the capital gains tax formula for real estate investors, providing an option to choose between a 12.5% tax rate without indexation or a 20% rate with indexation for properties acquired before July 23, 2024
Real EstateCapital Gains TaxIndexation BenefitFinance BillNirmala SitharamanReal Estate MaharashtraAug 06, 2024
The revision is part of amendments to the Finance Bill that will be moved in the Lok Sabha by Finance Minister Nirmala Sitharaman. The move follows concerns among middle-class and other property owners that they would be disadvantaged under the new regime, which does away with indexation benefit while lowering the tax rate from 20% to 12.5%.
Although tax authorities and Sitharaman had sought to allay the fears, arguing that people won’t be worse off under the new dispensation, the government chose to remove an irritant in a budget welcomed on most other counts. Several experts had argued that the changes would impact older properties more.
The change in capital gains tax formula for real estate almost ended up burying the gain of Rs 17,500 that would accrue to taxpayers following the change in slabs under the new tax regime.
The government’s decision to rework the proposal is expected to bring relief to real estate investors who were concerned about the impact of the new tax regime on their investments.
In other news, the Brihanmumbai Municipal Corporation (BMC) has announced that property tax rates will remain unchanged for 2024-25. The last revision occurred in 2015-16. Proposed hikes in 2020-21 and 2022 were rejected. Any increase next year will require state approval, given the absence of elected corporators. Property tax remains BMC's largest revenue source, surpassing the abolished octroi since 2017.
Frequently Asked Questions
What is the revised proposal for capital gains tax on real estate?
The revised proposal provides individuals and HUFs the option to pay tax along with indexation benefit at 20%, or at 12.5% without indexation, depending on where they are better off.
Why did the government rework its proposal on long-term capital gains tax for real estate?
The government reworked its proposal to alleviate concerns among middle-class and other property owners that they would be disadvantaged under the new regime.
What is the impact of the revised proposal on real estate investors?
The revised proposal is expected to bring relief to real estate investors who were concerned about the impact of the new tax regime on their investments.
Will property tax rates change in 2024-25?
No, property tax rates will remain unchanged for 2024-25, as announced by the BMC.
What is the largest revenue source for the BMC?
Property tax remains BMC's largest revenue source, surpassing the abolished octroi since 2017.
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