How removing indexation benefits for capital gains tax on property might impact the residential market
indexation benefit from the capital gain tax on property has spooked him.
“The new taxation is good for short-term investors but not long-term investors. I calculated the tax outgo for the three properties in Bangalore I had held for over ten years. My tax outgo is 3x now without indexation. In many cases, I would not have paid any tax and had the option to offset them over the eight years,” he said.
Experts say that the recent abolishment of indexation benefits on property sales is expected to slow down the resale residential market and deter owners of older properties and investors due to increased tax liabilities reducing potential profits. This change will likely moderate price growth in the resale segment and increase reduced transparency in value to avoid higher taxes, undermining efforts to formalise the real estate sector, they said.
“The current changes represent a substantial shift in the capital gains landscape, prompting taxpayers to reconsider their investment and tax planning strategies,” said Manoj Agarwal, MD of Agarwal Estates.
In a recent policy change, the government has revised the tax structure for long-term capital gains (LTCG) on non-financial assets, including real estate. The changes include eliminating the indexation benefit for calculating LTCG and reducing the tax rate from 20% to 12.5%, aiming to harmonise the tax system for both financial and non-financial assets.
However, properties acquired before 2001 will still benefit from indexation, ensuring the new rules only affect recent
