Centre to ease long term capital gains tax for sale of properties

As per the report, in case of the transfer of a long-term capital asset being land or building or both either by an individual or Hindu undivided family, acquired before the July 23, 2024, the taxpayer can compute his taxes under the new scheme [12.5% without indexation] and old scheme [20% with indexation] and pay such tax which is lower of the two.

Finance minister Nirmala Sitharaman in her budget speech had announced a hike in both long-term as well as short-term capital gains tax. The Centre had also proposed to do away with the indexation benefit for sale of property, which allowed property owners to adjust their gains for inflation.

While the short-term capital gains tax has been increased from 15 per cent to 20 per cent, LTCG will be flat at 12.5 per cent.

Real estate, tax experts welcome move

Here’s what the tax and real experts said about the government’s decision. 

“This move shall provide much-needed relief to taxpayers as the same shall assuage any situation wherein the taxpayer would need to pay higher taxes even though on an indexed basis there is no real gain to the taxpayer,” Gaurav Karnik, Partner and Real estate National Leader, EY India, said.

Vivek Jalan, Partner, Tax Connect Advisory said,”Retrospective tax creates an uncertain environment that disrupts the financial position of a taxpayer. LTCG taxation for real estate had a great benefit of inflation adjusted indexation wherein in case you would sell a long term capital asset, say property, then the LTCG would be 20% after taking the benefit of indexed cost of acquisition and improvement.”
 
“After 23rd July 2024, i.e. the day when the Union Budget was announced, even for old properties, indexation was removed with a logic of ease of computation and the rate of LTCG without indexation has also been increased from 10% to 12.5%,” he added. 

“This would certainly impact property sellers, especially those who had bought properties before 23rd July 2024 with a tax planning, and consequently the real estate industry, which is a big employment generator in the economy. would be hit hard. Now the government may make this change prospective for properties purchased after July 23, 2024. This will provide a much awaited relief for property owners,” Jalan said.

Niranjan Hiranandani, chairman of the Hiranandani Group and NAREDCO, said,”The government’s initiative to allow taxpayers the option to compute taxes either at 12.5% without indexation or at 20% with indexation on real estate transactions is a significant step forward.” 

“This relief applies to the transfer of long-term capital assets, such as land or buildings, acquired before July 23, 2024. By enabling taxpayers to choose the lower tax burden between the new and old schemes, the amendment is poised to drive investment and enhance sales across housing segments,” he added.