Finance Minister Nirmala Sitharaman is set to propose a significant amendment to the long-term capital gains (LTCG) tax regime in the Lok Sabha on Wednesday, following her response to the Finance Bill 2024 debate.

Key Points:

• Tax Amendment Proposal: Property owners to have the choice between a 12.5% tax rate without indexation or a 20% rate with indexation for properties acquired before July 23, 2024.
• Flexible Tax Regime: Taxpayers can select the tax regime that minimizes their tax liability based on their individual circumstances.
• Amendment Details: Expected to be introduced by Finance Minister Sitharaman as part of the Finance Bill 2024-25.

The proposed amendment offers a notable adjustment to the LTCG tax framework. It provides property owners with the flexibility to choose between a reduced tax rate of 12.5% without indexation benefits and the traditional rate of 20% with indexation for assets sold before July 23.

Indexation adjusts the gains from property sales for inflation, thereby affecting the effective tax rate.

In her Budget announcement on July 23, Sitharaman had proposed removing indexation benefits for real estate sales, while reducing the LTCG tax rate from 20% to 12.5%.

Although this change was aimed at reducing overall tax burdens, experts had expressed concerns that it could lead to higher effective taxes for long-term property holders.

The forthcoming amendment aims to provide relief by allowing property owners to choose the tax regime that best suits their financial situation.

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