The real estate sector rejoiced on Wednesday as Finance Minister Nirmala Sitharaman replied to the Parliament and stated that real estate indexation rules would be relaxed.
Sitharaman said, “It empowers the taxpayer to choose what suits them better,” She said that the current amendment specifies that there will be no additional tax on people. “We listened to the people.”
The changes in the amendment offer property owners two options for calculating their long-term capital gains tax: The changes in the amendment offer property owners two options for calculating their long-term capital gains tax:
12. 5% LTCG rate without indexation: This one allows you to pay a lower rate of tax, which is 12 percent. 5%, on the gains resulting from the sale of the property, realizing that the actual cost of the purchase price may have been inflated and that the property may have depreciated in value. The capital gains to be charged will be computed as follows: 15.
20% LTCG rate with indexation: This old approach permits the taxpayers to agree to the higher tax rate of 20%, but they can manage the increase in the property’s purchase price caused by the inflation factor with reference to the Cost Inflation Index furnished by the Central Board of Direct Taxes. This adjustment can help reduce taxable capital gains significantly and, therefore, have a positive impact on the taxes to be paid.
Sanjoo Bhadana, Founder and MD of 4S Developers, also supported this decision, stating that ‘The decision, in a way, offers freedom of choice to property owners. They can think it over and choose the tax slab as and whenever they plan to sell’.
Mohit Jain, Managing Director of Krisumi Corporation, also appreciated this move, stating, “This change is highly beneficial to the property owners and, by extension, the real estate industry, which is one of the biggest employers of people in the economy can enjoy more stability in the market.”
The government’s offer of this flexibility in the taxation of LTCG is believed to positively affect the real estate business, which has faced multiple problems in the recent past.
