Centre looking at uniformity in capital gains tax for real estate: Report

Final inclusion in the budget remains subject to approval by senior decision-makers.

To bring uniformity to capital gains tax, the Centre is contemplating a revision in the holding period for immovable assets such as real estate, The Economic Times has reported. Currently, profits from real estate sales held for less than 24 months are treated as short-term capital gains, contrasting with the 12-month threshold for listed equities and equity mutual funds.

The proposed change would classify property held for more than 12 months as a long-term asset, aligning it with equity investments, the report said. This adjustment, however, is not expected to alter the existing tax rates for both short-term and long-term capital gains. Currently, long-term capital gains tax on property stands at 20 percent, offering indexation benefits to offset inflation adjustments.

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"The proposal aims to standardise the holding period without immediate tax rate adjustments, possibly revisiting the capital gains tax regime in more detail after broader consultations," the reported quoted a source as saying.

Moneycontrol could not verify the report independently.

The proposal also includes potential concessions for senior citizens, contemplating increased thresholds for ancestral property gains or exemptions for proceeds utilised in medical expenses and geriatric care. Final inclusion in the budget remains subject to approval by senior decision-makers, its said.

Tax experts expect a relaxation in the capital gains tax regime, which, they said, be positive for the investment climate.

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"Reasonable tax rates on capital gains are crucial for savings and retirement planning, especially in the absence of robust social security systems," Kumarmanglam Vijay, partner at JSA Advocates & Solicitors, told ET.

The move, if implemented, could potentially increase property market liquidity and alleviate pricing pressures, officials said.