Long Term Capital Gains Tax: Finance Minister Nirmala Sitharaman had talked about giving 12.5 percent long term capital gains tax by removing the indexation benefit given on selling a house in the general budget. But now there is a proposal from the government to withdraw it.
Property Capital Gains: When Finance Minister Nirmala Sitharaman reduced the tax on selling property from 20 to 12.5 percent in the budget presented on 23 July 2024, people did not like it. Actually, the government had talked about stopping the benefit of indexation under the new rules. The effect of this in most cases was that a person had to pay more tax than before on selling property. But now in view of the unhappiness among the people, the government has proposed to change the proposal of long term capital gains tax on real estate.
Tax can be paid under any option
Under this, an individual and Hindu Undivided Family (HUF) will have two options. He can pay 20% tax with the already applicable indexation. Apart from this, he will also have the option of paying tax under the new scheme of 12.5 percent. The details of this amendment in the Finance Bill, 2024 have been distributed to the Lok Sabha members. He can pay whichever of the two options gives less tax. This change will be applicable to properties purchased before July 23, 2024. Finance Minister Nirmala Sitharaman will propose this change in the Finance Bill to be presented in the Lok Sabha on Wednesday.
The new rules were leading to higher taxes
The government took this decision because the middle class and other property owners were worried that the new rules would make them pay more taxes. The new rules have done away with the ‘indexation’ facility that takes into account the increase in prices due to inflation. Along with this, the tax rate has been reduced from 20% to 12.5%. This change was made so that all types of property are taxed equally and not differently. However, the tax authority and Sitharaman tried to assure people that the new rules would not harm them. Many experts said that these changes would have a greater impact on old properties.
If the government had not changed the tax slabs under the new rules for tax on real estate, taxpayers would have benefited by only Rs 17,500. But due to the change in the tax formula for capital gains on real estate, this benefit was on the verge of ending. Sudhir Kapadia, Senior Advisor, Tax and Regulatory Services, EY India, said, “The government has given more relief. People have been given the freedom to choose what is best for them. The government has tried to ensure that no one is harmed.” In the last few years, the government has given ‘Dada’ status to the changes in tax, which means that the new rules will be applicable from now on. But this time the central government has done such a thing that people were not given time to adapt themselves to the new rules. Especially in the real estate sector, where it takes a lot of time for any transaction to take place and for the registration of the sale deed.
