Realty Players Welcome LTCG Tax Amendment Proposal, Investors Can Choose Option for Tax Calculation

New Delhi, Aug 7, 2024: Government on August 6, decided to rework its Budget proposal on long-term capital gains (LTCG) tax for property sale by giving individuals and HUFs (Hindu Undivided Families) the option to pay tax along with the existing indexation benefit at 20%, or at 12.5% without indexation, depending on what suits the investors. This is for properties purchased before the July 23, 2024. For all purchases after this date, LTCG tax will be 12.5% without any indexation benefit.

The decision came after concerns from property owners that they would stand at a loss under the new regime which does away with the indexation benefit, which adjusts inflation. Tax rate was reduced to 12.5% from 20% to ensure same tax rates for all asset classes. 

Vimal Nadar, Senior Director & Head of Research, Colliers India, said, “The government’s amendment to not enforce the revised taxation rules on long term capital gains arising out of sale of land & buildings retrospectively is expected to boost investors’ & homeowners’ sentiment and thus the real estate sector at large. The discretion to opt between higher tax rate with indexation and lower tax rate without indexation, whichever results in lower tax liability in property sales, aims to avoid higher tax expense in cases where the gains are not significant to offset the indexation benefits over time. The flexibility now provided to taxpayers to compute taxable gains under both the scenarios also removes administrative inconvenience and simplifies tax computation without any potential loss to the seller on properties acquired before July 23, 2024. At a time when housing sales are stabilising at higher levels than the past average, this amendment is timely and will aid in allaying concerns around taxability of capital gains”.

Shrinivas Rao, FRICS, CEO, Vestian, said, “Post removal of indexation benefit in the Union Budget 2024-25, investors adopted a wait-and-watch approach to reassess their investment strategies. However, the government’s recent announcement to restore the indexation benefit is expected to boost supply in the secondary market and stabilize demand-supply dynamics by attracting investors, who now have two options to optimize their returns. They can evaluate the value of their assets at the time of sale to secure best returns on their investments.”