- LTCG tax rate on real estate reduced from 20% with indexation to 12.5% without indexation.
- The new rate is beneficial for properties appreciating 1.7 times in five years or more.
- Indexation benefit retained for properties bought or inherited before 2001.
The Income Tax department‘s recent change in the long-term capital gains (LTCG) tax rate for real estate is set to provide significant savings for most taxpayers. The reduction from 20% with indexation to 12.5% without indexation offers a more favorable tax regime, especially for properties that have appreciated considerably over time.
For properties held for five years, the new tax rate becomes advantageous when the property’s value increases by 1.7 times or more. This shift in tax policy aims to encourage real estate investments by reducing the tax burden on substantial gains.
Significant Savings Ahead: New LTCG Tax Rate for Real Estate
The reduction in long-term capital gains (LTCG) tax from 20% with indexation to 12.5% without indexation marks a major shift for real estate investors. This change, effective from July 23, 2024, simplifies the tax calculation and could result in substantial savings for many property owners. For properties that have seen significant appreciation, this new tax regime will be financially beneficial compared to the previous system.
The Income Tax department notes that the new rate is particularly advantageous for properties appreciating by 1.7 times or more over five years. This adjustment reflects an effort to align tax policies with real estate market trends and encourage investment. However, the indexation benefit remains for properties bought or inherited before 2001, offering continued inflation protection for older investments.
The updated LTCG tax rate represents a positive shift for real estate investors, offering substantial savings and potentially stimulating further investment in the sector.
“The nominal real estate returns are generally in the region of 12-16% per annum, much higher than inflation.”
