The government is set to address concerns from investors about recent budget changes to property tax.
They will amend the Finance Bill, 2024, to restore the benefit of indexation for real estate investors.
Amendments in the Finance Bill
On Tuesday, the government shared a list of amendments to the Finance Bill, 2024 with Lok Sabha members.
The key change is related to real estate investments. The amendment will ensure that investors continue to receive indexation benefits when selling property.
This move responds to significant objections regarding the initial budget changes.
Initial Budget Changes
In the full budget for the financial year 2024-25, presented on July 23, Finance Minister Nirmala Sitharaman announced a reduction in the long-term capital gains tax on property sales from 20% to 12.5%.
However, this also involved removing the indexation benefit for calculating tax liability. These changes took effect on the same day.
Disputes and Criticisms
The government aimed to simplify capital gains tax by removing distinctions between asset classes, following industry advice.
Despite this, many analysts criticized the removal of indexation benefits, arguing it would increase tax liabilities for investors.
Government Revenue from LTCG
Long-term capital gains tax has been a significant revenue source for the government, generating Rs 2.78 lakh crore over the last five years.
For the assessment year 2023-24 alone, revenue from LTCG tax was Rs 98,682 crore.
New Tax Options for Investors
Under the new amendment, investors will have two tax options for property sales:
Old System: Pay long-term capital gains tax at 20% with indexation benefits.
New System: Pay capital gains tax at 12.5% without indexation benefits, applicable only for properties purchased before July 23, 2024.
