INSUBCONTINENT EXCLUSIVE:
A flexible tax calculation will effectively give grandfathering provision for property transactions before July 233 min read Last Updated :
Aug 06 2024 | 11:23 PM IST
The government on Tuesday sought to address a significant concern stemming from the 2024-25 Budget
announcement by introducing flexibility in the computation of long-term capital gains (LTCG) tax on unlisted assets, including
properties.
For any assets, such as land or buildings, sold before July 23, taxpayers can choose between the new and old regimes, opting
for whichever results in a lower tax liability.
Under the new LTCG regime, the tax rate is set at 12.5 per cent without the benefit of
Conversely, the old regime imposes a 20 per cent tax but allows for indexation benefits
This flexibility effectively serves as a grandfathering provision for all property transactions completed before the Budget's presentation
in Parliament on July 23.
This adjustment is among the key amendments proposed in the Finance Bill, 2024, regarding the taxation of
immovable properties.About 25 additional amendments have been proposed in the Bill
Of these 19 pertain to direct taxes and the remaining to indirect tax laws including customs.
Finance Minister Nirmala Sitharaman is
expected to present this amendment, along with others, in the Lok Sabha on Wednesday following her response to the debate on the Finance
Bill 2024.
Commenting on the tweak, Sudhir Kapadia, a senior advisor at EY, said: "With this proposed change to the original Finance
Bill, the government has clearly heeded the legitimate concerns of many taxpayers
Without indexation, the tax outgo could have been higher for those selling older properties." He further said what is now proposed gives
20 per cent to 12.5 per cent and eliminating indexation benefits for homes purchased on or after April 1, 2001.
This proposal has sparked
concerns regarding real estate transactions, as indexation has historically allowed homeowners to account for inflation in tax
calculations.
Under the originally proposed rule, homeowners would not have been able to adjust for inflation, potentially leading to
substantial taxes, especially on older properties with lower selling prices.
Indexation is a method used to adjust the purchase price of
an asset, such as property, for inflation over time, reducing the taxable capital gains upon sale
By removing indexation, the government aims to simplify the tax calculation process.
However, this change has led to higher tax
liabilities for property owners, as the original purchase price is now used for calculating capital gains without adjustment for
inflation.First Published: Aug 06 2024 | 9:32 PMIST
