Lower LTCG Tax: Boost for Real Estate Investors

Revenue Secretary Sanjay Malhotra states that changes in Long-Term Capital Gain Tax (LTCG) in the Budget, announced by Finance Minister Nirmala Sitharaman, will benefit real estate investors. The LTCG has been reduced from 20% to 12.5% but indexation benefits have been removed, simplifying tax computation processes.

Revenue Secretary Sanjay Malhotra on Wednesday noted that the changes in Long-Term Capital Gain Tax (LTCG) unveiled in the Budget by Finance Minister Nirmala Sitharaman will prove advantageous for real estate investors.

The Budget has decreased the LTCG rate from 20% to 12.5%, however, the indexation benefits have been abolished.

Originally, indexation allowed taxpayers to adjust the gains from selling capital assets by accounting for inflation.

This proposal has sparked concerns that property sellers might incur higher capital gain taxes.

'This is primarily a simplification measure. Some have expressed concerns about the removal of indexation, but I want to alleviate their worries. While indexation has been removed, tax rates have been significantly reduced from 20% to 12.5%. This will benefit most long-term real estate investors as the return rate exceeds 10-11%,' Malhotra said in an interview with PTI.

There will also be a rollover benefit, meaning no tax on capital gains up to Rs 1 crore if proceeds are reinvested in purchasing a house.

New regulations in the 2024-25 Budget maintain indexation benefits for properties acquired before 2001, with revised tax rates effective from July 23, 2024.