FM removes indexation benefit for property sales, reduces long-term capital gains tax in Budget

Indexation benefit on sale of property has been removed, with a new long-term capital gains tax rate of 12.5%.

Finance Minister Nirmala Sitharaman announced the removal of the indexation benefits for the sale of property in the Union Budget, and also reduced the rate of long-term capital gains tax on property sales to 12.5 percent, from the existing 20 percent.

Owing to the removal of indexation, property sellers will not be able to inflate the sale price of the property by tying the purchase price to the cost inflation index, or CII, issued by the Income Tax Department, used to compute capital gains tax.

"While the reduction in long-term capital gain tax to 12.5 percent without indexation benefits will be closely monitored for its practical impact, however, aligning the holding period for long-term capital gains with that of equity shares by reducing it to 24 months will significantly boost much-needed investment and enhance competitiveness within the sector," said Niranjan Hiranandani, chairman of the Hiranandani group, and the realtors' body NAREDCO.

(this is a developing story)