The proposed amendment gives taxpayers a choice between a 12.5% long-term capital gains tax rate without indexation or a 20% rate with indexation for properties acquired before July 23, 2024. This change follows Budget 2024's proposal to eliminate indexation benefits. Despite concerns, the Income Tax department considers this development advantageous.
In a major relief for the real estate industry, Finance Minister Nirmala Sitharaman will introduce an amendment to the Finance Bill, allowing taxpayers to choose between a 12.5% long-term capital gains rate without indexation or a 20% rate with indexation for properties acquired before July 23, 2024.
According to the amendments to the Finance Bill, 2024, circulated to LokSabha members on Tuesday, individuals or HUFs who purchased houses before July 23, 2024, can calculate their taxes using the new scheme (12.5% without indexation) or the old scheme (20% with indexation) and pay the lower of the two.
The Modi-led government's decision comes in response to backlash from the real estate sector. Stakeholders warned that the indexation proposal introduced in Budget 2024 could negatively impact the sector's growth.
Indexation Rule in Budget 2024:
Previously, indexation benefits allowed homeowners to adjust the property's cost basis for inflation, thereby reducing the net profit and the associated tax liability.
The finance ministry held a round of discussions on concerns raised from various quarters regarding the move, including potential increases in black money transactions.
The LokSabha has started discussing the Finance Bill after passing the Appropriation Bill for the central government's expenditure for 2024-25 on Monday.
The passage of the Finance Bill by Parliament will finalize the budget process.
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