Following concerns and criticism regarding the Budget proposal to remove the indexation benefit on long-term capital gains (LTCG) from the sale of unlisted assets, the government has decided to offer taxpayers a choice in cases of property sales. Taxpayers can choose to either pay LTCG tax at a rate of 20 per cent with the indexation benefit or at the new rate of 12.5 per cent without the indexation benefit. Taxpayers would be expected to pay the lower of the two tax amounts, according to amendments in the Finance Bill.
These amendments are seen as a significant rollback of the earlier LTCG-related Budget announcements. Initially, the government defended the new LTCG tax regime, arguing that the removal of the indexation benefit was offset by the lower 12.5 per cent tax rate for most property transactions. However, the proposals faced backlash, with demands for a rollback or relief from various sectors, including real estate investors and property owners.
“For the transfer of a long-term capital asset, such as land or buildings, by an individual or Hindu Undivided Family (HUF), acquired before July 23, 2024, the taxpayer can calculate their taxes under the new scheme (12.5 per cent without indexation) and the old scheme (20 per cent with indexation) and pay the lower of the two amounts,” a source explained, detailing the key amendment.
