New Tax Regime: How Removal of Indexation Benefits Can Be Beneficial for Real Estate Taxpayers
CBDT Chairman Ravi Agrawal explains how the new tax regime can be beneficial for taxpayers in the real estate sector, despite the removal of indexation benefits.
Real EstateLtcgIndexationTax RegimeCbdtReal Estate PuneJul 24, 2024
The CBDT Chairman emphasized that the new system will result in less tax obligation for taxpayers. He explained that the intention behind this measure is to simplify the capital gains regime, which has been a long-standing demand from taxpayers. Agrawal acknowledged that the removal of indexation benefits has raised concerns among some stakeholders, but he believes that the new scheme will be beneficial in most cases.
Agrawal cited the example of a property bought in 2014 and sold in 2024-25. He noted that the benefit of indexation would only be 1.5 times, but in reality, property rates have gone up by more than three times in the last 10 years. This means that the new tax regime would be beneficial for taxpayers.
The CBDT Chairman also highlighted that the new regime is aimed at simplifying the process, making it easier for taxpayers to comprehend and for the tax department to implement. He added that the grandfathering clause would be applicable for old properties, and the indexation benefit would be retained for properties bought or inherited before 2001.
In addition to the real estate sector, Agrawal also addressed the increase in securities transaction tax (STT) on futures and options (F&O) trade, which was announced in the Budget. He explained that the exponential increase in F&O transactions and the associated risks led to the decision to tap into this revenue stream.
Information
The Central Board of Direct Taxes (CBDT) is a statutory authority that functions under the Central Board of Revenue Act, 1963. The CBDT is responsible for the administration of direct taxes in India, including income tax, wealth tax, and gift tax.
The CBDT is headed by a Chairman, who is assisted by six Members, including Members (Revenue), Members (Legislation), Members (Investigation), Members (Audit & Judicial), and Members (Personnel & Vigilance).
Frequently Asked Questions
What is the main change in the new tax regime for real estate transactions?
The new tax regime removes the benefit of indexation available to taxpayers, but reduces tax rates on capital gains earned from the sale of house properties held for the long term.
Why does the CBDT Chairman believe the new tax regime is beneficial for taxpayers?
The CBDT Chairman believes that the new tax regime is beneficial because property rates have gone up by more than three times in the last 10 years, making the new regime more favorable for taxpayers.
What is the grandfathering clause in the new tax regime?
The grandfathering clause applies to old properties, and the indexation benefit will be retained for properties bought or inherited before 2001.
Why was the securities transaction tax (STT) on futures and options (F&O) trade increased in the Budget?
The STT was increased due to the exponential increase in F&O transactions and the associated risks, which led to the decision to tap into this revenue stream.
What is the aim of the new tax regime according to the CBDT Chairman?
The aim of the new tax regime is to simplify the capital gains regime, making it easier for taxpayers to comprehend and for the tax department to implement, while minimizing disputes.
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