Proposal to Remove Indexation on Real Estate Sales in the Budget
Possibility of Increased Tax Burden on Investors
A negative proposal for the real estate sector has emerged in the central budget. The government has indicated that it plans to remove the indexation benefit on real estate sales. Additionally, it has revealed plans to increase taxes on short-term and long-term capital gains. These changes are expected to significantly impact investors.
The proposal suggests raising the tax on short-term capital gains from 15% to 20%. Meanwhile, long-term capital gains on all financial and non-financial assets will attract a tax rate of 12.5%. To benefit lower and middle-income groups, the proposal also suggests increasing the capital gains exemption limit on certain financial assets to Rs 1.25 lakh per year.
By removing the indexation benefit on real estate sales, property owners will no longer be able to adjust the purchase price for inflation, which will reduce their capital gains. Consequently, this will result in higher taxes. Currently, long-term capital gains from property are taxed at 10% with indexation benefits. Under the new proposals, this tax rate without indexation benefits is expected to rise to 12.5%.
