New Delhi: Government Proposes Amendment to Finance Bill 2024 on Long-Term Capital Gains Tax
In response to industry feedback, the government has proposed an amendment to the Finance Bill 2024 to provide taxpayers with a choice between two long-term capital gains (LTCG) tax regimes for properties acquired before July 23, 2024. The amendment was announced on Tuesday.
Finance Minister Nirmala Sitharaman, during the presentation of the Union Budget, had introduced a reduction in the LTCG tax rate from 20% to 12.5%. However, the indexation benefit, which adjusts the purchase price of real estate for inflation to reduce taxable gains, was eliminated for properties acquired on or after January 1, 2001.
The newly proposed amendment stipulates that for properties acquired before July 23, 2024, taxpayers will have the option to choose between two tax schemes: a 12.5% tax rate without indexation or a 20% tax rate with indexation. Taxpayers can select the option that results in a lower tax liability.
According to the amendment, “In the case of the transfer of a long-term capital asset, being land or building or both, by an individual or Hindu Undivided Family (HUF), which is acquired before the 23rd day of July, 2024, the taxpayer can compute his taxes under the new scheme (12.5% without indexation) and old scheme (20% with indexation) and pay such tax which is lower of the two.”
Indexation adjusts the cost of an asset to account for inflation, thus lowering the computed gains and reducing the tax burden.
Mukul Bagla, Chair of the Direct Tax Committee at the PHD Chamber of Commerce and Industry (PHDCCI), commented on the amendment, stating, “The Finance Bill 2024 has rationalized the taxation provisions related to long-term capital gains in the real estate sector. However, it should be noted that the Bill has removed the indexation benefit for all transactions occurring after July 23, 2024.”
The proposed amendment aims to provide taxpayers with flexibility and mitigate the impact of the removal of the indexation benefit on older property transactions.
New Delhi: Government Proposes Amendment to Finance Bill 2024 on Long-Term Capital Gains Tax
In response to industry feedback, the government has proposed an amendment to the Finance Bill 2024 to provide taxpayers with a choice between two long-term capital gains (LTCG) tax regimes for properties acquired before July 23, 2024. The amendment was announced on Tuesday.
Finance Minister Nirmala Sitharaman, during the presentation of the Union Budget, had introduced a reduction in the LTCG tax rate from 20% to 12.5%. However, the indexation benefit, which adjusts the purchase price of real estate for inflation to reduce taxable gains, was eliminated for properties acquired on or after January 1, 2001.
The newly proposed amendment stipulates that for properties acquired before July 23, 2024, taxpayers will have the option to choose between two tax schemes: a 12.5% tax rate without indexation or a 20% tax rate with indexation. Taxpayers can select the option that results in a lower tax liability.
According to the amendment, “In the case of the transfer of a long-term capital asset, being land or building or both, by an individual or Hindu Undivided Family (HUF), which is acquired before the 23rd day of July, 2024, the taxpayer can compute his taxes under the new scheme (12.5% without indexation) and old scheme (20% with indexation) and pay such tax which is lower of the two.”
Indexation adjusts the cost of an asset to account for inflation, thus lowering the computed gains and reducing the tax burden.
Mukul Bagla, Chair of the Direct Tax Committee at the PHD Chamber of Commerce and Industry (PHDCCI), commented on the amendment, stating, “The Finance Bill 2024 has rationalized the taxation provisions related to long-term capital gains in the real estate sector. However, it should be noted that the Bill has removed the indexation benefit for all transactions occurring after July 23, 2024.”
The proposed amendment aims to provide taxpayers with flexibility and mitigate the impact of the removal of the indexation benefit on older property transactions.
