The recent budget proposals on property tax had worried real estate investors. However, there is now some news that might bring them relief.
Reports suggest that the government is thinking about changing the proposals on capital gains tax and indexation.
Extra Year of Indexation Benefit?
According to Business Today TV, the government might delay ending the benefit of indexation on property sales.
Sources say the indexation benefit will continue for this financial year. The changes might start from the next financial year, FY 2025-26.
This gives investors about a year to sell their property and benefit from indexation.
Possible Delay in Long Term Capital Gain Tax Changes
Another possible change is regarding the long term capital gain (LTCG) tax. Finance Minister Nirmala Sitharaman proposed reducing the LTCG tax rate on property sales from 20% to 12.5%.
This change might also be postponed until the next financial year. The changes were supposed to start from July 23, 2024.
Two Options for Property Investors
The news suggests the government might offer two options to property investors. One option is to pay LTCG tax at 20% and get the benefit of indexation.
The second option is to pay a reduced LTCG tax rate of 12.5% but without the indexation benefit.
No Official Confirmation Yet
However, these changes are not confirmed yet. The Finance Ministry has not officially announced anything.
The news is based on sources, so until an official statement is made, these remain speculations.
Government’s Income from LTCG
Long term capital gain tax is a major income source for the government. In the last five years, the government earned Rs 2.78 lakh crore from LTCG.
In the assessment year 2023-24 alone, Rs 98 thousand 682 crore was earned from LTCG.
Opposition to Proposed Changes
The recent LTCG tax changes are expected to increase the government’s income. However, analysts
and investors argue that the changes will increase tax liability on property sales. This has led to criticism of the budget proposals and opposition in Parliament.
