Will Real Estate Sector Get Its Mojo Back?
The amendment to the Budget 2024 proposal on removal of indexation benefits on property sales has given relief to those who could be impacted by the retrospective taxation element.
Real EstateLtcgTaxationBudget 2024Indexation BenefitsReal Estate NewsAug 08, 2024
The amendment to the Long-Term Capital Gains (LTCG) tax regime has been a topic of discussion among taxpayers and real estate enthusiasts. The finance minister, in her Budget speech, had proposed to reduce the tax rate on gains from the sale of immovable assets from 20% (with indexation) to 12.5% (without indexation) for sales on or after July 23, 2024.
Before the Budget 2024 proposal, LTCG arising from the transfer of an immovable property were subject to tax at 20%, with the benefit of indexation. For properties acquired before April 1, 2001, taxpayers could deduct the actual cost of acquisition of the property or the fair market value of such property as on April 1, 2001, whichever is higher.
The government has addressed the concerns of taxpayers by introducing a grandfathering clause in relation to LTCG from transfer of immovable properties. This clause provides an option to taxpayers to calculate the tax on LTCG from transfer of an immovable property acquired before July 23, 2024, either at 12.5% without indexation or at 20% with indexation, whichever is beneficial to the taxpayer.
The introduction of grandfathering provisions has set to rest the anxiety amongst taxpayers who already hold immovable property. The provisions ensure that taxpayers are not at a loss because of removal of indexation benefits.
The real estate sector is expected to benefit from this amendment as it will encourage people to buy and sell properties without the fear of retrospective taxation. The reduction of tax rate to 12.5% along with removal of indexation benefit is expected to benefit taxpayers in many cases.
In conclusion, the amendment to the Budget 2024 proposal on removal of indexation benefits on property sales has brought relief to taxpayers and is expected to give a fillip to the real estate sector.Nangia Andersen LLP is a tax consulting firm that provides expert advice on tax-related matters.
Frequently Asked Questions
What is the new tax rate on LTCG from transfer of immovable properties?
The new tax rate on LTCG from transfer of immovable properties is 12.5% without indexation.
What is the grandfathering clause introduced in the Finance (No. 2) Bill, 2024?
The grandfathering clause provides an option to taxpayers to calculate the tax on LTCG from transfer of an immovable property acquired before July 23, 2024, either at 12.5% without indexation or at 20% with indexation, whichever is beneficial to the taxpayer.
How will the amendment to the Budget 2024 proposal affect the real estate sector?
The amendment to the Budget 2024 proposal is expected to give a fillip to the real estate sector as it will encourage people to buy and sell properties without the fear of retrospective taxation.
What is the fair market value of a property as on April 1, 2001, as per the provisions of the Income-Tax Act, 1961?
The fair market value of a property as on April 1, 2001, as per the provisions of the Income-Tax Act, 1961, is the actual market value of the property or its stamp duty value, whichever is lower, as on the said date.
Who can avail the benefit of the grandfathering clause introduced in the Finance (No. 2) Bill, 2024?
Taxpayers, including individuals and Hindu Undivided Family, can avail the benefit of the grandfathering clause introduced in the Finance (No. 2) Bill, 2024.
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