The below screenshot technically shows that a buyer receiving money in white is going to be benefitted by removal of indexation in property. This is just a freak case and would suggest not to go by it but follow below:
The correct perspective is as below in year 2024 post budget announcement on 23 July 2024
LTCG on Property.
Assume purchase value of property as Rs 1cr in 2000 when CII was 100.
Property sold in 2024 for Rs 4cr when CII is 363.
Indexed purchase value is 1x363÷100=3.63cr
LTCG is 4- 3.63= .37cr 37L
LTCG tax 20% is 7.4L
Without indexation Ltcg is
4cr - 1cr = 3cr
Tax @ 12.5% is 37.5L
7.4L till yesterday vs 37.5L today
*India 2025 Budget: Real Estate- Indexation elimination a dampener*
• *Recent announcement on real estate taxation, reducing LTCG from 20% to 12.5%, whilst eliminating indexation benefits (post 2001), is expected to follow certain trends:*
i) *Increased formalization* – With removal of indexation and lower tax rate, *property transactions are likely to become more transparent as buyers* and *sellers opt for right channels* to minimize tax liabilities.
ii) *Market slowdown* – *Homebuyers* (largely investors) who were previously *utilizing property sales to offset capital gains tax burdens may reconsider* their purchasing decisions *due to removal of indexation benefits,* which could temporarily dampen sales velocity.
iii) *Potential for increased speculative activity* – The *lower LTCG rate may incentivize short-tenure property investments,* as potential returns could outweigh loss of indexation benefits.
iv) *End-user demand will likely remain steady* – *Buyers purchasing homes for personal use are generally less sensitive to tax implications and will continue to drive market activity.* That said, *aligning LTCG in line with other asset classes* could potentially *increase long-term attractiveness of real estate* as an asset class.
*Some other highlights*
• *REITs, holding period for LTCG* has been *reduced from 36 months to 12 months;* this brings REITs at par with equities.
• The *abolition of indexation benefits in calculating capital gains tax on real estate and property will not affect properties held before 2001* and would continue to get indexation benefits.
• *Allocation of Rs10trn for urban housing* (includes Rs2.2trn by the central government over the next five years) will benefit *10mn urban households.*
• The *government will encourage states with high stamp duties for property registration* to moderate these duties.
• Government to consider lowering of duties on house purchases by women.
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