(MENAFN- AsiaNet News) As per the Union Budget 2024-25 announced by Finance Minister Nirmala Sitharaman on Tuesday (July 24), property owners should brace for higher taxes when selling old real estate. The new budget introduces significant changes to long-term capital gains (LTCG) taxation that are likely to affect most property sellers.
In her budget speech, Sitharaman announced the removal of the indexation benefit for LTCG tax on Real estate sales, alongside a reduction in the LTCG tax rate from 20% to 12.5%. This shift aims to simplify the tax process but may increase the tax burden on property owners, particularly those who have held their assets for over five years.
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Impact on property transactions:
Dhruv Agarwala, Group CEO of Housing and PropTiger, noted that the removal of indexation benefits marks a significant change for the real estate sector. "While the reduction in the LTCG tax rate to 12.5% is intended to simplify the tax regime, the elimination of indexation benefits could lead to a higher effective tax burden on real estate transactions," he explained.
Palka Arora Chopra, Director at Master Capital Services Ltd, expressed concern that this change might adversely affect investor returns and create a bearish outlook in the short term for the real estate sector.
Vaibhav Gupta, Partner at Dhruva Advisors, described the removal of cost indexation as a major shift with substantial implications for real estate returns.
Nilesh Sharma, President and Executive Director at SAMCO Securities, warned that this adjustment could slow the resale of residential properties and potentially increase cash transactions in the real estate market, which might be counterproductive.
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On a more optimistic note, Amit Goyal, Managing Director of India Sotheby's International Realty, welcomed the reduction in the LTCG tax rate. He believes this change will promote liquidity in property transactions and provide a more uniform long-term capital gains tax structure across various asset classes, addressing a long-standing investor demand.
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