Government gave taxpayers the option to calculate Capital Gain Tax on Real Estate
Those who buy a house before July 23, 2024, are getting a big relief from the government. Now the government is giving the option to choose between two tax rates for long-term capital gains (LTCG) tax. The indexation benefit allowed taxpayers to calculate the profit from the sale of capital assets after adjusting for inflation.
The government on Tuesday proposed significant relief for individuals who buy a house before July 23, 2024, giving them the option to choose between two tax rates for long-term capital gains (LTCG) tax.
In Budget 2024-25, it was proposed to reduce LTCG from 20% to 12.5%, but the indexation benefit was removed. The new rates have come into effect from July 23, 2024. The indexation benefit allowed taxpayers to calculate the profit from the sale of capital assets after adjusting for inflation.
Tax experts had said the changes proposed in the Budget would increase the LTCG tax burden. As per amendments in the Finance Bill, 2024 circulated to Lok Sabha members on Tuesday, individuals or HUFs buying homes before July 23, 2024, can calculate their taxes under both the new scheme [12.5% without indexation] and the old scheme (20% with indexation) and pay tax which is lower of the two.
After the Budget presentation, the Income Tax Department said the reduction in the long-term capital gains tax (LTCG) rate in the real estate sector is expected to lead to 'substantial tax savings' for most taxpayers.
As per the changes brought in the Budget for 2024-25, the government has retained the indexation benefit for taxpayers on properties bought or inherited before 2001.
Yogesh Kale, executive director, Nangia Andersen India, said through the proposed amendments to the new capital gains tax regime introduced in Budget 2024, the finance minister has tried to appease taxpayers by addressing the concerns raised to some extent.
Kale said while indexation benefit continues to be phased out, assets acquired before July 23, 2024 are proposed to be grandfathered with an option for taxpayers to pay capital gains tax at 12.5% without indexation or 20% with indexation, whichever is more beneficial.
Gauri Puri, partner, Shardul Amarchand Mangaldas & Co, said this will address the concerns of taxpayers that they will lose indexation benefits in exchange for a lower long-term capital gains tax rate. “Taxpayers can choose a more beneficial regime and should not suffer further due to the change in law. Concerns about taxation of inflation gains in respect of real estate acquired before the change in law have been addressed,” Puri said.
