Government Offers Tax Relief for Homebuyers: New Options for Long-Term Capital Gains

The government has proposed significant relief for homebuyers, allowing them to choose between two tax rates for long-term capital gains (LTCG). The new Budget lowers the LTCG from 20% to 12.5%, removing indexation benefits. However, properties bought before July 2024 can opt for the advantageous scheme.

The government on Tuesday introduced major tax relief measures for individuals who purchased homes before July 23, 2024, offering them a choice between two tax rates for long-term capital gains (LTCG).

The 2024-25 Budget proposed a reduction in the LTCG tax rate from 20 percent to 12.5 percent while eliminating indexation benefits, which previously allowed taxpayers to adjust gains for inflation. Despite concerns raised by tax experts regarding increased tax burdens, the amendments to the Finance Bill, circulated on Tuesday, permit homebuyers to compute and pay the lower of the two taxes.

Yogesh Kale, Executive Director at Nangia Andersen India, noted that this move aims to appease taxpayers by offering beneficial options. Gouri Puri, Partner at Shardul Amarchand Mangaldas & Co., added that the changes mitigate concerns about losing indexation benefits, ensuring taxpayers are not worse off due to the law change.

(With inputs from agencies.)