Govt amends Budget proposal on realty capital gains formula

FM Nirmala Sitharaman moved amendments to the Finance Bill to ease the impact of the Budget proposal on long-term capital gains tax for real estate, giving an option to taxpayers to choose between the new and old tax regimes and pay taxes wherever it is lower and asserted that govt has taken a number of measures to moderate the tax burden on the middle class.

Govt had decided to relax the proposal on long-term capital gains tax for real estate by providing individuals and HUFs (Hindu undivided families) the option to pay tax along with indexation benefit at 20%, or at 12.5% without indexation, depending on wherever it was lower.

The move to ease the proposal came against the backdrop of unease among the middle class and the real estate sector that they would be disadvantaged under the new regime, which does away with the indexation benefit, meant to adjust for inflation, while lowering the tax rate from 20% to 12.5% as part of a policy tweak to ensure that all asset classes face the same levy instead of multiple rates.

“Now, the current amendment we are bringing is for land and building assets acquired by individuals and HUF before July 23, 2024. It stipulates that in the case of transfer of long term capital asset, being land or building or both by an individual or HUF which is acquired before July 23rd, 2024 the taxpayer can compute his taxes under the new scheme which is 12.5% without indexation and the old scheme — 20% with indexation and pay such tax which is the lower of the two,” she said.