The government has decided to tweak its budget proposal regarding the indexation benefit removal on property transactions through an amendment to the Finance Bill, 2024. Taxpayers are being given now two options – either choose computation of tax on long-term capital gains at 12.5% rate without indexation or at 20% with indexation benefit on properties acquired until July 23, 2024.
Post Budget presentation, amid confusion over how the indexation would be calculated on ancestral and other old properties, the government came out with a clarification that the latest indexation withdrawal proposal was applicable on properties acquired after 2001, which means the capital gains would be grandfathered until 2001. But now with the proposed amendment to the Finance Bill, 2024, this grandfathering period is further increased to July 23, 2024.
Will you get indexation benefits on selling a property in future if bought it after July 23, 2024?
You won’t get an option to choose from 12.5% LTCG tax without indexation benefit and 20% LTCG tax with indexation in future if the property is bought after July 23, 2024.
Simply put, this comes as a relief for individuals who bought properties before July 23, 2024, as they have the option to choose between two tax rates for long-term capital gains (LTCG) tax.
Tax experts say that this is not a rollback. In fact, the government has chosen to give relief to those who could be impacted by the retrospective taxation element of the Budget proposal through an amendment, they said adding that with this amendment, there is no additional tax burden due to the proposal.
“While abolishment of indexation benefit continues, properties acquired prior to 23rd July 2024 are proposed to be grandfathered with option to the taxpayers to offer the capital gain tax either at 12.5% without indexation or 20% with indexation, whichever is more beneficial,” says Yogesh Kale, Executive Director, Nangia Andersen India.
FM Sitharaman in the Budget 2024-25 proposed lowering the LTCG from 20% to 12.5% without indexation.
“Property bought on Budget day or later will have only one option on LTCG which is 12.5%. This means there is no indexation benefit for them. So, indexation benefit has not been restored for these cases. So, in effect, this is a great move by the Government to remove retrospective taxation. Ideally, all tax moves should be prospective in nature and that seems to be the principle here,” says KS Roy, a personal finance expert.