GOI offers option to reduce LTCG Tax on properties

In the Budget 2024-25, the LTCG tax rate was reduced from 20% to 12.5%, but the indexation benefit was removed. The new rates took effect on July 23, 2024. Indexation allowed taxpayers to adjust capital gains for inflation, potentially reducing their tax burden.

According to amendments to the Finance Bill, 2024, individuals or Hindu Undivided Families (HUFs) who acquired properties before July 23, 2024, can now calculate their taxes under either the new rate of 12.5% without indexation or the old rate of 20% with indexation, and choose the lower tax amount.

Following the Budget presentation, the Income Tax department indicated that many taxpayers are expected to see substantial savings due to the lower LTCG tax rate.

The 2024-25 Budget also retains the indexation benefit for properties bought or inherited before 2001.

Yogesh Kale, Executive Director at Nangia Andersen India, noted that the proposed amendments address some taxpayer concerns. "Despite the removal of indexation benefits, properties acquired before July 23, 2024, can now be taxed at either 12.5% without indexation or 20% with indexation, whichever is more favorable," Kale said.

Gouri Puri, Partner at Shardul Amarchand Mangaldas & Co., added that this provision will alleviate taxpayer concerns about losing indexation benefits in exchange for a lower LTCG tax rate.

(ET)