According to Nirmala Sitharaman, taxpayers can now choose to compute their tax burden using the previous methodology or at lower rates without indexation.
The controversial long-term capital gains tax plan on real estate is being changed, according to a statement made by Union Finance Minister Nirmala Sitharaman on Wednesday.
According to her, taxpayers will now be able to determine their tax burden under the previous method or at lower rates without indexation, with the option to pay the lesser amount.
Sitharaman stated that taxpayers who use their capital gains from selling an old property to buy a new immovable property will be eligible for the rollover benefit during the Lok Sabha’s consideration of the Finance Bill 2024.
The change allows taxpayers to compute and choose the alternative that best suits their needs. The finance minister stated, “The current amendment ensures that there will be no additional tax burden on people.”
The declaration followed harsh criticism from opposition parties and tax experts of the Budget 2024–25 proposal to eliminate indexation advantages for long-term capital gains on property transactions.
The budget that was unveiled on July 23 called for eliminating the indexation benefit while lowering the long-term capital gains tax rate from 20% to 12.5%.
The Bill’s main change brings back the indexation benefit for homes bought before July 23, 2024. For individuals or Hindu Undivided Families (HUFs) who purchased real estate before to this date, there are two options available to them: they can use the indexation advantage and pay the long-term capital gains tax at the previous rate of 20 percent, or they can pay the tax at a lower rate of 12.5 percent without indexation.
Sitharaman added that the goal of the Budget’s plan to eliminate the indexation benefit was not to raise revenue but rather to standardize the tax rate on all asset classes.
Opposition demands review of LTCG tax proposal
Several members of the opposition requested finance minister Nirmala Sitharaman to examine the finance bill for the benefit of the middle class, bringing up the issue during the Lok Sabha’s Tuesday afternoon discussion on the bill’s recommendations.
Supriya Sule, the head of the Nationalist Congress Party (Sharadchandra Pawar), stated that it was unclear what exactly would be removed from long-term capital gains in terms of indexation. “Indexation is not clearly defined.”
She maintained that if someone purchased a property in 2002 for ₹1 crore and sold it for ₹5 crore, they would have to pay ₹50 lakh in LTCG without indexation, but they would have to pay ₹34 lakh with indexation.
