Government Reform: Enjoy Indexation Benefits on Property Sales, Pay 20% LTCG Under Old Scheme

Relief in Long Term Capital Gains Tax for Home Buyers Before July 23, 2024

Homebuyers purchasing properties before July 23, 2024, will get relief in Long Term Capital Gains Tax (LTCG). The central government made an amendment to the budget announcement on Tuesday, allowing buyers to benefit from indexation under the old scheme by paying 20% LTCG. However, under the new scheme, paying 12.4% LTCG will not provide this benefit. This means that when selling a house, one can choose between the old or new scheme.

Notably, in the 2024-25 budget, the government reduced the LTCG rate from 20% to 12.5%. However, it eliminated the benefit of indexation, which is determined based on inflation rates. Tax experts indicated that the proposed change could increase the LTCG burden on taxpayers. This issue led to widespread political opposition, with various opposition leaders in Parliament urging the government to retain the indexation benefit during the monsoon session. The amendment to the Finance Bill was announced on Tuesday.

Shardul Amarchand Mangaldas & Co partner Gauri Puri stated that this decision would provide significant relief to taxpayers who lost the indexation benefit. Now, taxpayers can choose between the old and new regimes and pay the lesser of the two taxes to benefit.