Property values indexed up to 2001 are grandfathered for capital gains: FM clarifies

Budget 2024

The equity markets had been spooked after the news of the long term capital gains not been offered any inflation benefit of indexation.

The indexation benefit where one can adjust the rising prices against the purchasing power of money or inflation, was silently taken away from real estate sector too.

While the move was anticipated to be affecting legacy homes owned for decades together, a clarification in the press confrence held after the Union Budget 2024 comes to the rescue of investors.

Also read | Budget 2024 Live Updates

The Finance Secretary Dr T V Somnathan announced that the capital gains made on real estate now would be taxed at 12.5 percent instead of 20 percent.

Additionally, the panel communicated that the indexation benefit offered until 2001 will be protected.

This clarification brings respite to many tax payers as the changes announced under the Union Budget on the capital gains would be effective starting July 23, 2024.

This means that even if an advance has been paid prior to the Union Budget 2024 announcement, but the agreement hasn’t yet been signed, then the loss on indexation would be applicable.

It is to be noted here that the cost inflation index table, which helps one calculate the indexation benefit on any capital asset used to differ a lot from one year to another prior to 2000. But lately, the needle doesn't move much, this reducing the indexation benefit.

“When the asset is held for a longer period, an asset owner takes the risk of the future changes in taxation," says Paras Savla, partner at KPB & Associates.

See here: FM declines additional tax deduction for NPS Vatsalya for children: Budget 2024