Relief for Property Owners: Indexation Amendment

Relief for Property Owners: Centre to Amend Indexation Proposal on Real Estate

In a significant development for property owners, Finance Minister Nirmala Sitharaman is set to amend the long-term capital gains (LTCG) tax proposal concerning real estate. The amendment, expected to be tabled in the Lok Sabha on Wednesday, follows her reply to the debate on the Finance Bill 2024.

What the Amendment Entails

The proposed amendment introduces a crucial choice for taxpayers. Those selling assets such as land or buildings before July 23, 2024, will now have the option to select between two tax regimes. They can choose a lower tax rate of 12.5% without indexation or a higher rate of 20% with indexation benefits. This flexibility allows taxpayers to opt for the tax regime that results in a lower tax liability.

Indexation Explained

Indexation adjusts the gains from property sales to account for inflation during the ownership period. This adjustment is made using the cost price index, ensuring that the tax burden reflects the real value of the gains.

Impact of the New Regime

Finance Minister Sitharaman’s recent budget announcement on July 23 included a reduction in the LTCG tax rate from 20% to 12.5%, alongside the removal of indexation benefits for real estate sales. While Sitharaman argued that this change would reduce average taxation overall, experts have raised concerns. They suggest that the new regime may lead to a higher effective tax burden for property owners, particularly those who have held their properties for more than five years.

What’s Next

The proposed amendment aims to address these concerns by providing taxpayers with the flexibility to choose the tax regime that best suits their financial situation. This move is expected to offer substantial relief to property owners navigating the complexities of capital gains taxation.

Stay tuned for updates as Finance Minister Nirmala Sitharaman presents this critical amendment to the Lok Sabha.

Aakhir Tak Editor-in-Chief

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