FM Nirmala Sitharaman announces amendment to LTCG tax proposal, offers new options
Nirmala Sitharaman said that taxpayers will now have the option to calculate their tax liability under the old system or at reduced rates without indexation.
Union finance Minister Nirmala Sitharaman on Wednesday announced that the contentious long-term capital gains tax proposal on real estate is being revised.
She said that taxpayers will now have the option to calculate their tax liability under the old system or at reduced rates without indexation and choose to pay the lower amount.
During the discussion on the Finance Bill 2024 in the Lok Sabha, Sitharaman said that taxpayers who invest the capital gains from selling an old property into purchasing new immovable property will be eligible for the rollover benefit.
“The amendment gives taxpayers the choice to calculate and determine which option works better for them. The current amendment ensures that there will be no additional tax burden on people,” said the finance minister.
The announcement came after the Budget 2024-25 plan to remove indexation benefits for long-term capital gains on property sales faced strong criticism from opposition parties and tax experts.
The Budget presented on July 23 had proposed a reduced long-term capital gains tax rate of 12.5 per cent, down from 20 per cent, but removed the indexation benefit.
The key amendment in the Bill restores the indexation benefit for properties purchased before July 23, 2024. Individuals or Hindu Undivided Families (HUFs) who bought properties before this date can choose to pay the long-term capital gains tax at a reduced rate of 12.5 per cent without indexation, or opt to use the indexation benefit and pay the tax at the previous rate of 20 per cent.
Sitharaman also said that the Budget's proposal to remove the indexation benefit aimed to standardise the tax rate across all asset classes rather than to increase revenue.
Opposition demands review of LTCG tax proposal
Raising the matter on Tuesday afternoon in the Lok Sabha during the debate on proposals of the finance bill, several Opposition members urged finance minister Nirmala Sitharaman to review it for the sake of the middle class.
Nationalist Congress Party (Sharadchandra Pawar) leader Supriya Sule said that the proposal to remove indexation from long-term capital gains was not clear. “There is no clarity on indexation.”
She said, if a person bought a house in 2002 for ₹1 crore and sold it for ₹5 crore, he or she would pay LTCG of ₹34 lakh with indexation while he would have to pay ₹50 lakh without indexation, she argued.
With PTI inputs