Finance Minister Nirmala Sitharaman announces changes in LTCG tax on real estate

Finance Minister Nirmala Sitharaman (Photo Source: Twitter)

Minister of Finance Nirmala Sitharaman on Wednesday said the controversial LTCG tax proposal property is amended to give taxpayers the option of calculating their tax liability according to the old system or reduced rates without indexation and paying the lower of the two.

Responding to the debate on the Finance Bill, Finance Minister Nirmala Sitharaman said that the extension relief will be available to taxpayers who buy a new property using capital gains on sale of an old property.

The 2024-25 budget proposal to remove the indexation benefit while calculating long-term capital gains on sale of property has been met with sharp criticism from various quarters, including opposition parties and tax experts.

The budget presented on 23 July assumed a lower tax rate on long-term pension insurance (LTCG) of 12.5 per cent (previously 20 per cent), while abolishing indexation benefits.

The major amendment in the Bill is about the restoration of indexation benefit on sale of properties purchased before July 23, 2024. Now, individuals or HuFs who purchased their houses before July 23, 2024, can opt to pay LTCG tax as per the new regime at the rate of 12.5% ​​without indexation or claim the indexation benefit and pay 20% tax.

Sitharaman said the Budget proposed to remove the indexation benefit with an aim to bring all asset classes under a single rate and not with an aim to raise revenue.