Relief to homeowners: Government brings back LTCG indexation on real estate

Homeowners can smile now. The controversy surrounding the removal of indexation benefits from real estate has been looked into.

Now, taxpayers can choose between the lower rate of 12.5 per cent without indexation or the higher rate of 20 per cent with indexation and pay the lower of the two calculated tax amounts. This applies to properties acquired before July 23, 2024.

Earlier budget announcement on real estate tax

In her budget speech on July 23, 2024, finance minister Nirmala Sitharaman had said that "long-term gains on all financial and non-financial assets will attract a (standard) tax rate of 12.5 per cent" in order to simplify our LTCG tax structure.

Previously, different LTCG rates were applied to various financial and non-financial assets. For example, selling an equity investment held for over a year attracted a 10 per cent LTCG tax, while non-financial assets such as real estate and gold were taxed at 20 per cent, if held for over two and three years, respectively

But the fine print of the budget had mentioned the removal of indexation while calculating long-term capital gains tax on properties. This created an instant uproar.

Suggested read: Budget 2024: Selling your property now may attract higher tax

Who benefits?

This move is likely to provide much-needed relief to individuals and Hindu Undivided Families (HUF) and lower the tax burden on the sale of immovable property, such as land and buildings.

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