Raghav Chadha Reacts To Government's Indexation Decision

After the government has introduced an amendment to the Finance Bill, 2024, providing relief for the real estate sector under the long-term capital gains (LTCG) tax regime, AAP MP Raghav Chadha said that he is glad that the finance minister has restored indexation benefit for investors on immovable property.

“From the 23rd day of July 2024, the day the budget was presented, I have been unequivocally saying that the removal of Indexation would be the biggest blow to Indian investors,” he said in an X post.

“However, the Govt has partially restored Indexation, not fully restored. I have two more suggestions to offer in this regard which would enable a full restoration of Indexation benefit: 1. Provide Indexation benefit on assets purchased even AFTER the 24th July, 2024 2. ⁠Provide Indexation benefit on ALL Asset classes, not just on immovable property,” he added.

According to a report by CNBC TV18, taxpayers will now have the option to choose between a lower 12.5% LTCG tax rate without indexation or a higher 20% rate with indexation for properties acquired before July 23, 2024.

The amendment allows taxpayers to calculate their tax liability under both the new and old schemes and opt for the lower tax amount. This move is intended to address concerns within the real estate market, particularly regarding the scrapping of indexation benefits announced in the Union Budget 2024.

Previously, the indexation allowed property sellers to adjust capital gains for inflation, calculated using the Cost Inflation Index (CII) published by the Central Board of Direct Taxes. This adjustment helped reduce the taxable gain on property transactions, particularly for properties purchased after April 1, 2001. However, the recent budget proposal to reduce the LTCG tax rate to 12.5% also eliminated this indexation benefit, sparking confusion and concern among taxpayers about the impact on real estate transactions.