Choose Between 12.5% Without Indexation OR 20% With Indexation On LTCG from Real Estate – (New Change 2024 Budget)

In a big relief to property owners, the government has decided (as of 7th August 2024) to move an amendment in the Finance Bill which will allow taxpayers to choose either a 12.5% LTCG tax rate without indexation or go for a 20% LTCG tax rate with indexation on gains from the sale of property purchased/acquired before 23^rd July 2024.

Also what is important to understand is that while this new move is beneficial to all existing owners of property (who acquired a property before the cut-off date of 23 Jul 2024), it isn’t of much cheer for new owners.

So if you have purchased a property after 23 Jul 2024, then you have no choice and you don’t get any indexation benefit when you sell later! Your LTCG tax will be 12.5% without indexation. So in a way, the government has grandfathered the LTCG gains with indexation benefits for those who got a property before the said cut-off date.

This announcement came after the government faced a huge backlash from many sections of property owners as well as those in the real estate sector who were of the view that the budget announcement to remove indexation would hurt the growth of the sector.

While the government had claimed that this earlier change would have reduced the actual tax outgo for most people, in reality, whether it is beneficial or not in any given scenario would have depended on multiple factors like the sale price, property price appreciation, number of years, etc. I did some more number crunching (which is too much to add here) and found that in general, this new rule is not good for those whose property hasn’t appreciated much. So if your property prices have stagnated or seen low growth of a few percentage CAGR, then the new tax will not be in your favour. For only those whose property’s value has grown substantially at a rate much faster than general inflation (or say growth in CII numbers), they will benefit somewhat from the new LTCG 12.5% tax rule without indexation on property sales. You can read about the Real Estate LTCG Tax Calculations (2024) in the earlier detailed post I have written on the Budget 2024 day.