Finance Minister Nirmala Sithraman on Wednesday addressed the Parliament and confirmed the relaxation of real estate indexation rules.

"The amendment gives a choice to taxpayer to now they can calculate and see what works better for them.The current amendment ensures that there will be no additional tax burden on people," the Finance Minister said.

"We heard the people," she added.

The changes in the amendment offers property owners two options for calculating their long-term capital gains tax:

12.5% LTCG rate without indexation: This option allows taxpayers to pay a lower tax rate of 12.5% on the capital gains from the sale of property without adjusting the purchase price for inflation (indexation).

20% LTCG rate with indexation: This traditional option allows taxpayers to pay a higher tax rate of 20%, but they can adjust the property's purchase price for inflation using the Cost Inflation Index (CII) provided by the Central Board of Direct Taxes. This adjustment can significantly reduce the taxable capital gains and, consequently, the tax liability.

Sanjoo Bhadana, Founder & MD, 4S Developers said, "The decision provides flexibility to property owners, allowing them to carefully evaluate their financial situation and select the tax option whenever they plan to sell."

While tabling her seventh Budget on July 23, Sitharaman announced changes to long-term capital gains taxation, including the removal of the indexation benefit for capital gains tax on real estate sales.

The government on Tuesday proposed an amendment to the long-term capital gains (LTCG) regime, which will allow taxpayers to choose between a lower tax rate of 12.5 per cent without indexation or a higher rate of 20 per cent with indexation for properties acquired before July 23, 2024.

"The amendment moved by the Finance Minister offers flexibility in computing long-term capital gains (LTCG) tax, allowing taxpayers to choose between a lower rate of 12.5% without indexation or a higher 20% rate with indexation for properties acquired before July 23, 2024. This enables property owners to strategically plan their sales, paying the lower of the two tax rates. This change provides much-needed relief for property owners and, consequently, the real estate industry, a significant employment generator in the economy. It also allows for more stability in the real estate market," said Mohit Jain, Managing Director, Krisumi Corporation.

Source: India Today