Government Eases LTCG Tax Burden to Support Homeowners

In a significant move to ease the financial burden on homeowners, the Indian government has announced a key amendment to the long-term capital gains (LTCG) tax framework for property sales as part of the Union Budget 2024. This amendment introduces a dual-option tax regime for properties acquired before July 23, 2024, allowing taxpayers the flexibility to choose the tax structure that best suits their financial circumstances.

Under the revised scheme, property owners can opt for a reduced LTCG tax rate of 12.5% without indexation benefits, or they may select the existing 20% rate, which includes indexation. This flexibility is especially important for individuals and Hindu Undivided Families (HUFs), providing them with an opportunity to navigate their tax liabilities more effectively. Industry experts believe this amendment will significantly benefit taxpayers who often face the challenge of inflated tax burdens, as the previous system did not sufficiently account for inflationary pressures. By offering this new tax regime, the government seeks to encourage investment in the real estate market while alleviating the potential financial strain on homeowners during property transactions.

Experts from the real estate sector have lauded this initiative for its potential to stimulate activity in the market. A partner at Deloitte India emphasised that the introduction of the dual-option framework enables property owners to secure a more favourable tax outcome, which could lead to smoother and more transparent transactions. Similarly, EY India’s Real Estate National Leader pointed out that this amendment addresses long-standing concerns over the loss of indexation benefits, ensuring that property owners do not find themselves at a disadvantage due to legislative changes. The reassurance provided by this amendment is likely to enhance clarity and stability in property dealings, thus reducing the uncertainty previously associated with tax adjustments.