Property owners are permitted by the government to calculate their LTCG tax and make a lower tax payment.

NEW DELHI: On Tuesday, the government announced a major tax break option allowing homeowners who purchased homes before July 23, 2024, to select between two tax rates for long-term capital gains (LTCG) tax.

The LTCG was supposed to drop from 20 to 12.5% in the Budget 2024–25, however the indexation advantages were eliminated. The revised prices became operative on July 23, 2024. Thanks to the indexation advantage, taxpayers were able to calculate gains from the sale of capital assets after accounting for inflation.

According to tax specialists, the LTCG tax burden would increase due to the Budget’s planned adjustments.

Individuals or HuF who purchased homes before July 23, 2024, may calculate their taxes under the new scheme [@13.5 percent without indexation] and the old scheme [@20 percent with indexation] and pay the tax that is lower of the two, according to the Finance Bill, 2024 amendments that were distributed to Lok Sabha members on Tuesday.

Individuals or HuF who purchased homes before July 23, 2024, may calculate their taxes under the new scheme [@13.5 percent without indexation] and the old scheme [@20 percent with indexation] and pay the tax that is lower of the two, according to the Finance Bill, 2024 amendments that were distributed to Lok Sabha members on Tuesday.

The government has kept the indexation benefit for taxpayers on properties purchased or inherited before 2001, as per the adjustments made in the 2024–25 Budget.

According to Yogesh Kale, Executive Director of Nangia Andersen India, the Finance Minister has attempted to allay taxpayer worries by partially resolving them in the proposed changes to the new capital gain tax regime included in Budget 2024.

“While the elimination of indexation benefit keeps going, properties acquired before 23rd July 2024 would like to be grandfathered with the option to the taxpayers to offer a capital gain tax either at 12.5% without indexation or 20% with indexation, whichever is more beneficial,” stated Kale.

In exchange for a lower long-term capital gains tax rate, taxpayers won’t have to worry about losing indexation benefits, according to Gouri Puri, Partner at Shardul Amarchand Mangaldas & Co.

“Taxpayers should not lose out on a change in the law; instead, they should be able to select the more advantageous regime.” Puri continued, “Apprehensions regarding the taxation of inflationary gains about real estate purchased before a legislative change have been addressed.