Facing a backlash over changes to the property transaction taxation, the FM has given some concessions to homeowners
Bowing to the popular pressure and critiques from MPs within the NDA coalition, the Central Government has relented to grant some relief for property transactions. Finance Minister Nirmala Sitharaman announced in the budget that the tax on long-term capital gains was reduced from 20% with indexation benefits to 12.5% but without indexation benefits. However, following significant opposition, an amendment is being made to The Finance Bill, 2024. For the transfer of a long-term capital asset such as land or a building acquired before July 23, 2024, the taxpayer can now choose to calculate their tax either at 12.5% without indexation under the new scheme or at 20% with indexation under the old scheme and pay whichever amount is lower. Indexation adjusts purchase price for inflation, reducing tax liability on gains from investments like debt funds. The government eliminated indexation benefits on long-term capital gains, increasing taxable gains. It prevents inflation from eroding returns on long-term investments. This adjustment marks a significant reversal from the government’s firm stance on the issue after the Budget.