Relief for home buyers: Government eases LTCG tax rules | Fusion - WeRIndia

In a significant move for home buyers, the Indian government has amended the Long-Term Capital Gains (LTCG) regime for real estate, offering a choice between two tax rates.

Taxpayers can now opt for a lower 12.5% tax rate without indexation or a higher 20% rate with indexation for properties acquired before July 23, 2024.

This amendment to the Finance Bill 2024 allows individuals and Hindu Undivided Families (HuFs) to calculate their taxes under both schemes and choose the one that results in a lower tax payment.

This change brings substantial relief to those dealing with long-term capital gains on real estate transactions.

The flexibility in the grandfathering provision applies to all property transactions completed before the Budget’s presentation on July 23. Thus, it ensures that taxpayers can benefit from the most advantageous tax rate.

In the Union Budget 2024, Finance Minister Nirmala Sitharaman announced several tax-related updates, one of which was the removal of indexation benefits for real estate transactions.

This change coincided with a reduced LTCG tax rate from 20% to 12.5%. Indexation, which adjusts the purchase price of an asset to account for inflation, previously served to reduce taxable gains and, consequently, the tax burden.

The new regulations will take effect on July 23, 2024, with properties acquired before 2001 continuing to benefit from indexation.

Recent acquisitions will be subject to the updated rules. Transactions completed before the specified date will not be affected by these changes.

Before the Budget 2024, indexation benefits allowed homeowners to adjust their property’s cost basis for inflation. Thus, it helped them reduce their taxable profits and associated tax liabilities.

In addition to these changes, the Union Budget also introduced notable revisions to the New Tax Regime, including an increased Standard Deduction of ₹75,000 and adjustments to tax slabs.

The Securities Transaction Tax (STT) on futures and options was also raised, along with an increase in the capital gains tax on shares and stocks from 10% to 12.5%, which could impact post-tax returns.

These amendments collectively aim to offer taxpayers more flexibility while simplifying the tax implications of real estate transactions.

Image from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on January 22, 2017

Image Reference: https://pxhere.com/en/photo/516507