In a big relief to taxpayers, Government has moved amendment to let taxpayers select either 12.5% LTCG rate without indexation or 20% rate with indexation for property acquired before July 23, 2024.
The development was included in list of amendments to Finance Bill, reported ETNow.
In Budget 2024 presented by Finance Minister Nirmala Sitharaman, the government proposed eliminating indexation benefits for homeowners. This change means that homeowners who profit from selling their property will now have to pay tax on the entire profit amount, rather than on the inflation-adjusted profit. Indexation is used to adjust the purchase price of an investment to reflect the effect of inflation on it.
Previously, indexation benefits allowed homeowners to increase the property’s cost basis to account for inflation, thereby reducing the net profit and the associated tax liability.
The elimination of indexation has raised fears of a significant tax burden for taxpayers and the potential for increased illicit financial activities in property deals. However, the Income Tax department has refuted such claims and called the move ‘advantageous.
The move of the Centre comes as it faced backlash by the real estate sector. The industry captains cautioned the government that the proposal to remove indexation benefits for long-term capital gains in real estate will hurt the growth of the sector.
