Reviving Indexation: A Timely Boost for Real Estate Investors
In a significant move to provide relief to property investors, Finance Minister Nirmala Sitharaman has proposed amendments to the long-term capital gains (LTCG) provisions in the latest Finance Bill. The amendments, which are expected to be introduced on Wednesday, aim to reintroduce the indexation benefit for land and building purchases made before July 23, 2024. This change comes after numerous calls for a relaxation in the budget provisions, addressing concerns from various stakeholders.
Indexation is a crucial tool that adjusts the purchase price of an asset for inflation, thereby reducing the taxable gains on the sale of the asset. By allowing the use of the indexation benefit, the amendments will provide significant tax relief to resident individuals and Hindu Undivided Families (HUFs). Under the proposed changes, taxpayers will have the option to choose between two regimes: a 20% tax rate with indexation or a 12.5% tax rate without indexation, opting for whichever results in a lower tax liability.
The introduction of the grandfathering clause for LTCG tax on property acquired before July 23, 2024, is another key feature of the proposed amendments. Grandfathering ensures that the new tax rules will not apply to transactions made before the specified date, thereby protecting investments made under the previous tax regime. This measure will offer much-needed stability and predictability for investors, encouraging continued investment in the real estate sector.
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While these changes are set to benefit resident individuals and HUFs, it is important to note that there will be no relief for NRIs, companies, or LLPs. The amendments also include minor clarifications on TDS/TCS provisions and an expanded search and seizure procedure, ensuring comprehensive adjustments to the tax framework.
Overall, the reintroduction of the indexation benefit and the grandfathering clause signify