Exciting New LTCG Tax Options for Homebuyers in 2024 Budget

The Indian government has introduced significant relief measures for homeowners who purchased properties before July 23, 2024. In response to concerns raised over the Budget 2024-25 proposals, the government now allows these individuals to choose between two tax rates for long-term capital gains (LTCG) on property sales.

Key Changes in LTCG Tax

The Budget 2024-25 initially proposed reducing the LTCG tax rate from 20% to 12.5%, but this came with the removal of indexation benefits. Indexation allows taxpayers to adjust the purchase price of an asset for inflation, thereby reducing the taxable capital gain. The new tax rates took effect on July 23, 2024.

Options for Taxpayers

To address concerns about the increased tax burden due to the removal of indexation, the government has amended the Finance Bill, 2024. Taxpayers who bought homes before July 23, 2024, can now choose the more beneficial of the two options:

12.5% LTCG without indexation
20% LTCG with indexation

This option aims to provide flexibility and potentially reduce the tax liability for homeowners.

Expert Opinions

Tax experts have welcomed the amendments, noting that they address taxpayer concerns about losing indexation benefits. Yogesh Kale, Executive Director at Nangia Andersen India, stated that the amendments aim to appease taxpayers by offering a choice between the new and old tax regimes. Gouri Puri, Partner at Shardul Amarchand Mangaldas & Co., added that this move ensures taxpayers are not worse off due to the change in law, especially concerning inflationary gains on properties acquired before the law change.

Additional Provisions

The government has also retained the indexation benefit for properties bought or inherited before 2001. This move is expected to provide substantial tax savings for many taxpayers in the real estate sector, according to the Income Tax department.

Conclusion

The amendments to the Finance Bill, 2024, reflect the government’s effort to balance tax reforms with taxpayer concerns. By allowing homeowners to choose the more favorable tax regime, the government aims to provide relief and address the inflationary impact on long-term capital gains. (LTCG TAX)

This new measure is a part of the broader tax reforms introduced in the Union Budget 2024-25, which also includes changes to short-term capital gains tax and other financial assets to simplify the tax structure and reduce the burden on taxpayers.

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