The real estate industry is celebrating the government’s decision to let taxpayers choose between two long-term real estate deals. However, analysts predict that this decision will have a significant impact on current homeowners as well as future purchases.
Following the Union Budget’s proposal to impose an index-bearing long-term capital gains (LTCG) tax rate of 12.5% on assets acquired prior to July 23, 2024, the debate got underway.
The decision sparked intense discussion among all parties involved, including the industry and real estate brokers.
In order to give taxpayers the option of choosing between a 12.5% long-term capital gains (LTCG) tax rate without indexation and a 20% rate with indexation for property acquired before July 23 of this year, the Center has now amended the Finance Bill 2024.
Homeowners now have more options when it comes to their tax obligations when they decide to sell their house. Selecting the 20% tax rate with indexation would be advantageous for properties that have been owned for an extended period of time and whose value has increased significantly due to inflation. By accounting for inflation in the purchase price, indexation can lower the taxable gain and total tax obligation.
The 12.5 percent rate without indexation may be more advantageous and result in a smaller tax burden for properties owned for shorter periods of time or during low-inflation times, according to Anuj Puri, Chairman of Anarock Group. This modification offers clarification and suggests a possible reduction in the tax burden, which could boost the residential real estate market.
The fact that buyers have a variety of choices for handling their potential capital gains tax liability will boost their confidence. According to Puri, this will lead to increased demand, especially in areas where there has been a noticeable increase in property values.
Furthermore, some homeowners may decide to sell their properties ahead of schedule in order to take advantage of the new tax structure due to the expectation of these changes. As a result, there will be more housing units available overall, which will assist to control costs.
Investor apprehension was heightened by the worry about greater LTCG tax liabilities on property sales, particularly for homes purchased prior to the deadline.
Offering this option will significantly increase investments in the real estate industry across all housing segments and is a historic step toward maintaining the attitude of taxpayers and investors at the center.
“Additionally, the rollover benefits remain intact which means that if capital gains are invested, deductions under Sections 54, 54F and 54EC for buying or constructing residential real estate up to specified limits, LTCG will continue to be exempt from tax,” said Nitin Bavisi, CFO of Ajmera Inc.
All things considered, this action will be extremely beneficial to the real estate business and all of its stakeholders, promoting strong growth and dynamic expansion throughout the sector. This flexibility basically acts as a grandfathering clause for all real estate deals that were finalized prior to the budget’s July 23 presentation to Parliament.
“Additionally, the rollover benefits remain intact which means that if capital gains are invested, deductions under Sections 54, 54F and 54EC for buying or constructing residential real estate up to specified limits, LTCG will continue to be exempt from tax,” said Nitin Bavisi, CFO of Ajmera Inc.
All things considered, this action will be extremely beneficial to the real estate business and all of its stakeholders, promoting strong growth and dynamic expansion throughout the sector. This flexibility basically acts as a grandfathering clause for all real estate deals that were finalized prior to the budget’s July 23 presentation to Parliament.
