Impact of Indexation Removal on Real Estate- You Pay More

 

The Indian Union Budget 2024 introduced significant changes to the capital gains tax structure, particularly benefiting the real estate sector. Here’s an in-depth look at the key changes and their implications:

  Key Changes in Capital Gains Tax for Real Estate

 

1. Reduced Long-Term Capital Gains (LTCG) Tax Rate:

    - New Rate: The LTCG tax rate for real estate assets has been reduced from 20% to 12.5%.

    Holding Period: This reduced rate applies to real estate assets held for over 24 months.

 

2. Continued Indexation Benefit:

  Indexation allows the cost of acquisition to be adjusted for inflation, thus reducing the taxable capital gains. This benefit continues under the new tax regime.

  Example Calculation

Property price 

Index Table 

Long Term Capital Gain Under Old Taxation Rule 

# New Tax Regime:

- Purchase Price: ₹18+ 2.6 = Rs.20.60 lakh

- Sale Year: 2018

- Sale Price: ₹60 lakhs 

- Capital Gain: ₹20.6 lakh - ₹60 lakh = ₹40.6 lakh

- Tax Rate: 12.5%

- Tax Payable: 12.5% of ₹60 lakh = ₹5.07 lakh

  Impact of the Changes

Now I have to pay more.