Let’s compare the Long Term Capital Gains (LTCG) provisions related to real estate between the new Budget 2024 and the current provisions:
- LTCG Tax Rate:
- New Budget 2024: The LTCG tax rate on property sales has been reduced from 20% to 12.5%1.
- Current Provisions: Previously, the LTCG tax rate was 20%.
- Indexation Benefit:
- New Budget 2024: The budget fine print reveals that the indexation benefit on real estate has been removed1. Indexation adjusts the purchase price of an asset for inflation, reducing taxable profits and tax liabilities. Without indexation, taxpayers may face increased taxes despite the lower LTCG rate.
- Current Provisions: Indexation was available, allowing sellers to adjust the purchase price for inflation.
- Holding Period:
- New Budget 2024: The holding period for real estate investments remains at 24 months2. However, there were reports suggesting a possible reduction to 12 months, bringing it on par with mutual funds and equities3.
- Current Provisions: The holding period for LTCG tax on real estate is 24 months.
In summary, while the LTCG tax rate has decreased in the new budget, the removal of indexation benefit may impact sellers. It’s essential to stay informed about any further changes and consult a tax professional for personalized advice..
You can use the following excel calculator to exactly see how much LTCG you need to pay if you want to sale your property this year in current vs new proposed LTCG tax rates.