New Delhi: In a move that will relieve taxpayers and the real estate sector, the government plans to modify the Finance Bill 2024, which was submitted last month, to allow for greater flexibility in the computation of capital gains tax on immovable property.
According to a person with knowledge of the situation, Finance Minister Nirmala Sitharaman is anticipated to make changes to the Bill’s provisions on Wednesday in Parliament in order to provide the tax relief.
The plan is to let sellers of assets acquired before July 23, 2024, the option to choose between paying capital gains tax under the old and new tax regimes, based on which one suits them best. The benefit of indexation on real estate sales is thereby restored.
According to the anonymous source, “the taxpayer can compute his tax at either at 12.5% without indexation—the new scheme—or at 20% with indexation, the old scheme, and pay such tax that is lower of the two in the case of transfer of a long-term capital asset such as land or building acquired prior to 23 July, 2024.”
An inversion:
Amit Singhania, managing partner at Areete Law Offices, states that this is a reversal of the indexation benefit’s withdrawal.
Singhania states that “such excess shall be ignored if the tax payable under the old regime (with indexation benefit) at the rate of 20% exceeds the tax payable under the new regime (without indexation benefit) at the rate of 12.5%.”
An email requesting feedback on the piece was received on Tuesday; as of the time of writing, the finance ministry had not replied.
The term “indexation benefit” describes how capital gains tax is calculated by factoring in inflation to the asset’s acquisition price. This lessens the seller’s tax liability. A cost inflation index is used to calculate the indexed purchase price (CII).
Chairman of the Hiranandani Group and NAREDCO, Niranjan Hiranandani, praised the action and described it as a major advancement.
According to Hiranandani, “the amendment is poised to drive investment and enhance sales across housing segments by enabling taxpayers to choose the lower tax burden between the new and old schemes.” “We appreciate the finance minister’s progressive approach to putting these helpful measures into effect.”
modified in the budget
The government had proposed to change the capital gains tax structure in the budget that was presented to Parliament on July 23. However, investors had called for the restoration of the indexation benefit because they believed that the lower tax rate in the bill without indexation would not always benefit the sellers.
On the other hand, the finance bill’s proposed amendments aim to remove the foreign investors’ advantage of neutralizing foreign exchange fluctuations and raise the tax rate from 10% to 12.5%, according to a notice of proposed amendments that Mint was able to view.