No Plans to Revoke LTCG Tweaks on Real Estate: Government Sources
Government sources have clarified that there will be no rethink on changes made to Long Term Capital Gains Tax (LTCG) in the Union Budget, addressing concerns over removal of Indexation benefit on property sales.
Real EstateLtcgProperty SalesTax CalculationCapital Gains TaxReal Estate MumbaiJul 24, 2024
According to government sources, the LTCG provisions made in the budget are beneficial for taxpayers and will not be revised. The Union Finance Minister, Nirmala Sitharaman, had announced LTCG simplification across asset classes in the Union Budget, which included the removal of Indexation benefit on capital gains related to property sales.
The withdrawal of Indexation has raised concerns that it will lead to massive tax liability for taxpayers and may also lead to black money generation in property transactions. However, the Central Board of Direct Taxes (CBDT) has issued a clarificatory note to address these concerns.
The CBDT has clarified that the proposed new tax rate without Indexation is beneficial in most cases. The budget has proposed a flat capital gain tax of 12.5 per cent on capital appreciation on selling property, instead of a 20 per cent tax on capital appreciation with Indexation benefits.
The income tax department has explained that the nominal real estate returns are generally in the region of 12-16 per cent per annum, much higher than inflation. The Indexation for inflation is in the region of 4-5 per cent, depending on the period of holding. Therefore, substantial tax savings are expected for a vast majority of taxpayers.
The department has also explained that there will be tax savings under the new proposal on properties sold in different time durations. For properties held for five years, the new regime will be beneficial if the property price has appreciated 1.7 times or more. Similarly, if a property is held for 10 years and it has appreciated 2.4 times or more, the new tax regime will be beneficial for the taxpayer.
Information The Union Budget 2024-25 has introduced significant changes to the tax structure, including the simplification of LTCG across asset classes. The government has aimed to make the tax system more efficient and taxpayer-friendly.
The Central Board of Direct Taxes (CBDT) is a statutory body responsible for the administration of direct taxes in India. The CBDT is headed by the Chairman and also comprises six Members.
Frequently Asked Questions
What is the proposed flat capital gain tax on selling property?
The proposed flat capital gain tax on selling property is 12.5 per cent.
What is the benefit of the new tax regime on property sales?
The new tax regime is beneficial in most cases, with substantial tax savings expected for a vast majority of taxpayers.
What is the Indexation for inflation on property sales?
The Indexation for inflation is in the region of 4-5 per cent, depending on the period of holding.
Will the new tax regime lead to massive tax liability for taxpayers?
No, the new tax regime is beneficial in most cases, and substantial tax savings are expected for a vast majority of taxpayers.
What is the purpose of LTCG simplification in the Union Budget?
The purpose of LTCG simplification is to make the tax system more efficient and taxpayer-friendly.
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