New Delhi, Delhi, 7th of August, 2024 :
1. Vimal Nadar, Senior Director & Head of Research, Colliers India
The government’s amendment to not enforce the revised taxation rules on long term capital gains arising out of sale of land & buildings retrospectively is expected to boost investors’ & homeowners’ sentiment and thus the real estate sector at large. The discretion to opt between higher tax rate with indexation and lower tax rate without indexation, whichever results in lower tax liability in property sales, aims to avoid higher tax expense in cases where the gains are not significant to offset the indexation benefits over time. The flexibility now provided to taxpayers to compute taxable gains under both the scenarios also removes administrative inconvenience and simplifies tax computation without any potential loss to the seller on properties acquired before July 23, 2024.At a time when housing sales are stabilising at higher levels than the past average, this amendment is timely and will aid in allaying concerns around taxability of capital gains.
2. Akhil Saraf, Founder and CEO, Reloy
I’m glad the government is partially undoing the change.
However entry and exit costs of real estate – stamp duty needs to be re looked.
5%-6% on buying and selling real estate vs 0.1% STT on equities is inherently unfair to the largest job creating sector.
3. Shrinivas Rao, FRICS, CEO, Vestian“Post removal of indexation benefit in the Union Budget 2024-25, investors adopted a wait-and-watch approach to reassess their investment strategies. However, the government’s recent announcement to restore the indexation benefit is expected to boost supply in the secondary market and stabilize demand-supply dynamics by attracting investors.” Mr. Rao further added, “Investors now have two options to optimize their returns. They can evaluate the value of their assets at the time of sale to secure best returns on their investments.”
| Scenarios | 5 Years | 10 Years | 5 Years | 10 Years | 5 Years | 10 Years | ||||||
| Old Tax | New Tax | Old Tax | New Tax | Old Tax | New Tax | Old Tax | New Tax | Old Tax | New Tax | Old Tax | New Tax | |
| Holding Period (No. of years) | 5 Yrs | 5 Yrs | 10 Yrs | 10 Yrs | 5 Yrs | 5 Yrs | 10 Yrs | 10 Yrs | 5 Yrs | 5 Yrs | 10 Yrs | 10 Yrs |
| Purchasing Cost | 25,00,000 | 25,00,000 | 25,00,000 | 25,00,000 | 25,00,000 | 25,00,000 | 25,00,000 | 25,00,000 | 25,00,000 | 25,00,000 | 25,00,000 | 25,00,000 |
| Indexed Purchasing Cost* | 31,40,138 | Nil | 37,81,250 | Nil | 31,40,138 | Nil | 37,81,250 | Nil | 31,40,138 | Nil | 37,81,250 | Nil |
| Tax Rate | 20.0% | 12.5% | 20.0% | 12.5% | 20.0% | 12.5% | 20.0% | 12.5% | 20.0% | 12.5% | 20.0% | 12.5% |
| House Price increase at CAGR | 5% | 5% | 7.5% | 7.5% | 10.0% | 10.0% | ||||||
| Current Market Value | 31,90,704 | 31,90,704 | 40,72,237 | 40,72,237 | 35,89,073 | 35,89,073 | 51,52,579 | 51,52,579 | 40,26,275 | 40,26,275 | 64,84,356 | 64,84,356 |
| Long-Term Capital Gain | 50,566 | 6,90,704 | 2,90,987 | 15,72,237 | 4,48,935 | 10,89,073 | 13,71,329 | 26,52,579 | 8,86,137 | 15,26,275 | 27,03,106 | 39,84,356 |
| Long-Term Capital Gain Tax | 10,113 | 86,338 | 58,197 | 1,96,530 | 89,787 | 1,36,134 | 2,74,266 | 3,31,572 | 1,77,227 | 1,90,784 | 5,40,621 | 4,98,045 |
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