Why indexation benefits on property transactions may be retained
The Indian government is currently reviewing proposals to modify indexation benefits for real estate transactions, according to CNBC-TV18. The review process is reportedly a response to feedback received from various stakeholders within the industry. This discussion comes after the recent Budget announcement, which proposed lowering the long-term capital gains (LTCG) tax on real estate to 12.5%, albeit without the indexation benefit.
Proposed dual LTCG regime
Among the proposals under consideration is the introduction of a dual LTCG regime, specifically designed for real estate transactions. This new system would offer a tax rate of 20% with indexation benefits, and an alternative one of 12.5% without these benefits. The proposal aims to address concerns about potential negative impacts on the real estate market if indexation were removed entirely.
Retention of indexation benefits for certain properties
Another proposal recommends retaining the indexation benefit for properties that were purchased before July 2024. This measure could possibly provide some relief to current investors in the real estate market.
