Impact of Budget 2024: Realty Sector Grapples with Indexation Move
Real estate industry experts weigh in on the removal of indexation benefit for property sales, introduced in Budget 2024.
Real EstateIndexationBudget 2024Long Term Capital GainsLtcgReal Estate MumbaiJul 25, 2024
The finance minister's move to reduce long-term capital gains (LTCG) tax rate from 20% with indexation to 12.5% without indexation for real estate is expected to benefit most taxpayers, according to the I-T department. Indexation, which adjusts the purchase price of a property for inflation, thereby reducing the gains and ultimately the tax liability, is no longer applicable.
Many industry experts disagree with the I-T department's assessment, citing that the removal of indexation benefit will deter sellers in the secondary market due to higher taxable capital gains. Ritesh Mehta, senior director at JLL, said,
Frequently Asked Questions
What is indexation?
Indexation is a method of adjusting the purchase price of an asset, such as property, for inflation, thereby reducing the gains and ultimately the tax liability.
What is the new LTCG tax rate for real estate?
The LTCG tax rate for real estate has been reduced from 20% with indexation to 12.5% without indexation.
How will the removal of indexation benefit affect sellers?
The removal of indexation benefit is expected to deter sellers in the secondary market due to higher taxable capital gains.
Who will be affected most by this change?
Investors who sell property investments to diversify into other asset classes are likely to be affected most by this change.
Will this move increase tax outflows?
Yes, the removal of indexation benefit for property and other assets is expected to increase tax outflows.
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