Finance Minister Nirmala Sitharaman Proposes Tax Relief on Property Transactions
New Delhi, India – Finance Minister Nirmala Sitharaman has proposed an amendment in the Finance Bill to provide significant relief on capital gains tax for property transactions. The amendment allows taxpayers to choose between a lower tax rate of 12.5% without indexation or a higher rate of 20% with indexation for properties acquired before July 23, 2024, the day the union budget was presented in the Lok Sabha.
Taxpayers can calculate taxes under both schemes and opt for the one with the lower tax burden. This new cut-off date replaces the previous cut-off of 2001, which had caused concerns among long-time property owners.
Tax expert and Chartered Accountant Ved Jain explained, “Long-term capital gain tax on the transfer of land and buildings acquired before July 23, 2024, will be the lower of the tax computed under the new law at 12.5% without indexation or the old law at 20% with indexation.”
Initially, the Finance Bill proposed a flat long-term capital gains tax of 12.5% without indexation benefits, replacing the previous 20% tax with indexation. The proposed amendments now give taxpayers a choice similar to the income tax structure, where they can choose between the old structure with deductions or the new structure without deductions.
Jain added that the grandfathering proposal benefits only individual and Hindu Undivided Family (HUF) taxpayers, not companies or Non-Resident Individuals. “The grandfathering is only for resident individuals and HUFs. Non-resident individuals, companies, partnership firms, and LLPs will not receive this benefit for properties acquired before July 23, 2024,” he said.
The amendment also applies to unlisted equity transactions done before July 23, 2024, which will be taxed at 10% long-term capital gains instead of the proposed 12.5% tax.
Aam Aadmi Party leader Raghav Chadha expressed his satisfaction with the partial restoration of the indexation benefit for investors in immovable property. He suggested further improvements, including extending the indexation benefit to assets purchased after July 24, 2024, and to all asset classes.
Dr. Niranjan Hiranandani, Chairman of the Hiranandani Group and NAREDCO, praised the Finance Minister’s amendments, calling them beneficial for the real estate sector. “Allowing taxpayers to choose the lower tax burden between the new and old schemes is a significant step forward. This relief applies to long-term capital assets like land or buildings acquired before July 23, 2024,” he said.
The Lok Sabha has started discussions on the Finance Bill after passing the Appropriation Bill for the central government’s expenditure for 2024-25. The passage of the Finance Bill by Parliament will complete the budget process.
Doubts Revealed
Finance Minister -: The Finance Minister is a person in the government who is responsible for managing the country’s money and finances. In India, this person is Nirmala Sitharaman.
Nirmala Sitharaman -: Nirmala Sitharaman is the current Finance Minister of India. She helps make decisions about how the government spends and collects money.
Tax Relief -: Tax relief means reducing the amount of money people have to pay as tax. It helps people save more money.
Property Transactions -: Property transactions are deals where people buy or sell houses, land, or buildings.
Finance Bill -: The Finance Bill is a proposal made by the government about how it will collect and spend money. It needs to be approved by the parliament.
Amendment -: An amendment is a change or addition to a law or document. In this case, it means changing the rules about taxes.
Indexation -: Indexation is a way to adjust the value of something, like property, to account for inflation. It helps keep the value fair over time.
Hindu Undivided Family -: A Hindu Undivided Family (HUF) is a family in India that is treated as a single unit for tax purposes. It includes all members of a family who are descended from a common ancestor.
Non-Resident Individuals -: Non-Resident Individuals are people who live outside India but may still have to pay taxes in India for certain things.
Unlisted Equity Transactions -: Unlisted equity transactions are deals involving shares of companies that are not listed on the stock exchange. These shares are not publicly traded.