Govt moves amendment to provide relief for real estate under LTCG regime

In a major relief to property owners, the government on Tuesday proposed an amendment to the long-term capital gains (LTCG) regime, offering taxpayers the choice between a lower tax rate of 12.5 percent without indexation or a higher rate of 20 percent with indexation for properties acquired before July 23, 2024.

According to the proposed amendment, taxpayers who sold assets such as land or buildings before July 23 can opt for the new or old tax regimes, selecting the one that results in a lower tax liability.

Finance Minister Nirmala Sitharaman is expected to move the amendment in the Lok Sabha on Wednesday after she replies to the debate on the Finance Bill 2024-25. Indexation adjusts the gains from property sales by accounting for inflation during the ownership period, using the cost-price index.

While presenting her seventh Budget on July 23, Sitharaman announced changes to long-term capital gains taxation, including the removal of the indexation benefit for real estate sales. However, she also reduced the LTCG rate from 20 percent to 12.5 percent.

Although the Finance Minister indicated that this change would lead to an overall reduction in average taxation, experts cautioned that it could result in a higher effective tax burden on LTCG for property owners, especially those who have held their properties for more than five years.