Simplified Long-Term Capital Gain Tax: A Boon for Real Estate Investors
The recent changes in Long-Term Capital Gain Tax (LTCG) will benefit most real estate investors, according to Revenue Secretary Sanjay Malhotra.
Real EstateLong Term Capital Gain TaxLtcgIncome TaxBudgetReal Estate NewsJul 24, 2024
Malhotra explained that the rate of return on investments in real estate is typically higher than 10-11%, and therefore, the reduced tax rate will benefit most investors in the long term. Additionally, the government has retained the rollover benefit, which allows investors to reinvest their sale proceeds in buying a new house without paying capital gains tax up to ₹1 crore.
The changes to the LTCG tax rate will come into effect from July 23, 2024, and will apply to properties bought or inherited after 2001. The government has, however, retained the indexation benefit for taxpayers on properties bought or inherited before 2001.
In summary, the simplified LTCG tax regime is expected to benefit most real estate investors, particularly those who plan to hold their properties for the long term. With the reduced tax rate and retention of the rollover benefit, investors can now look forward to higher returns on their investments.
Frequently Asked Questions
What is the new Long-Term Capital Gain Tax rate?
The new LTCG tax rate is 12.5%.
What is the indexation benefit in LTCG?
The indexation benefit allows taxpayers to compute gains arising out of the sale of capital assets after adjusting for inflation.
Will the removal of indexation benefit lead to higher capital gain tax?
No, the reduction in tax rates from 20% to 12.5% will more than compensate for the removal of indexation benefits.
What is the rollover benefit in LTCG?
The rollover benefit allows investors to reinvest their sale proceeds in buying a new house without paying capital gains tax up to ₹1 crore.
When will the changes to the LTCG tax rate come into effect?
The changes will come into effect from July 23, 2024.
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