Indexation benefit allowed to Resident Individuals/HUF for immovable properties acquired before 23rd July 2024.

NEW DELHI: Facing adverse reaction from investors and property owners, the Centre has decided to give a major relief to real estate investors by allowing them to opt for either a 12.5% long-term capital gains tax rate without indexation or a 20% rate with indexation for property purchased before July 23, 2024.

The big relief has been given to resident Individual and Hindu Undivided families (HUFs). For non-residents and companies, partnership firm, LLP, the indexation benefits won’t be available.

The change has been included in the amendment to the Finance Bill 2024. As per the proposed amendment: “In the case of transfer of a long-term capital asset, being land or building or both, by an individual or Hindu undivided Family (HUF), which is acquired before the 23rd day of July, 2024, the taxpayer can compute his taxes under the new scheme [@12.5% without indexation] and old scheme [@20% with indexation] and pay such tax which is lower of the two,”

In her Budget speech last month, Finance Minister Nirmala Sitharaman said the tax on LTCG was slashed to 12.5% without indexation from 20% with indexation. That necessarily meant that the indexation benefit would not be available on real estate transactions for assets bought after 2001.

Capital Gains Tax on the Sale of Property

Gains from sale of property are subject to capital gains taxation. Short term capital gains occur when the property is sold within 2 years of purchase and is taxed under applicable slab rates, without any indexation benefits. 

On the other hand, long term capital gains occur when the property is sold after 2 years from the date of purchase. Long term capital gains are taxed at 12.5%, without indexation benefit, relaxation available to individuals and HUF.

Short-term Capital Gain Tax Rates on sale of Property

Property sold within 2 years of purchase are classified under short term and Taxed at applicable slab rates.

Long-term Capital Gain Tax Rates on sale of Property

Acquired and sold before 23rd July 2024: 20% with indexation benefit

Acquired and sold after 23rd July 2024: 12.5% without indexation

Note: If the property was acquired before 23rd July 2024 and sold after the said date, the taxpayer can compute tax either at 20% with indexation or 12.5% without indexation, whichever is beneficial to the taxpayer.