No rethink on real estate LTCG long tweaks: Govt Sources - World News Network

New Delhi [India], 24 July (ANI): Amid concerns over removal of Indexation benefit on property sales for tax calculation, government sources on Wednesday said that there will be no reconsideration on changes made to Long Term capital gains tax (LTCG) in the Union Budget.
“There will be no rethink on LTCG provisions made in the budget as it is beneficial for the tax payers” according to sources
LTCG simplification across asset classes was one of the major announcement made by Union Finance Minister Nirmala Sitharaman in the Union Budget 2024-25. Interestingly, the Indexation benefit on capital gains related to property sales was done away with.
The withdrawal of indexation has led to concerns that it will lead to massive tax liability for tax payers and will also lead to blackmoney generation in property transactions.
However, the Central Board of Direct Taxes issued a clarificatory note on social media platform X.
The Income tax department has denied reports that people will have to pay higher taxes on profits made on selling a house or land property under the budget proposal of a flat 12.5 per cent tax without indexation. It said that the proposed new tax rate without indexation is beneficial in most cases.
The budget 2024-25 has proposed a flat capital gain tax of 12.5 per cent on capital appreciation on selling property instead of a 20 per cent tax on capital appreciation with indexation benefits.
The income tax department in its social media post said that the nominal real estate returns are generally in the region of 12-16 per cent per cent per annum, much higher than inflation. The indexation for inflation is in the region of 4-5 per cent, depending on the period of holding. Therefore, substantial tax savings are expected for a vast majority of such taxpayers.
The income tax department has also explained that there will be tax savings under the new proposal on properties sold in different time durations.
For properties held for five years, the new regime will be beneficial if the property price has appreciated 1.7 times or more.
The IT department added that even if the property is held for 10 years and it has appreciated 2.4 times or more the new tax regime will be beneficial for the taxpayer.
If a property is bought in 2009-10 and the value has increased to 4.9 times or more the new tax proposal will be beneficial for the taxpayers.
However, the income tax department admits that if the per annum return on property price is less than 9-11 percent the earlier tax rate of 20 percent with indexation will be beneficial.
The income tax department adds that simplification of any tax structure has the benefits of ease of compliance in computing taxes, filing, and maintaining records. The new proposal has also removed the differential rates of taxes for various asset classes. (ANI)

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