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Industry experts predict that LTCG tweaks will stimulate investment and increase sales

The recent amendment to the long-term capital gains (LTCG) tax regime proposed in the Finance Bill 2024 has sparked optimism among industry executives, who believe that it will have a positive impact on investments and housing sales in the country. The move, which reintroduces the indexation benefit for home buyers, is expected to drive investment and enhance sales across housing segments.

In Budget 2024, Finance Minister Nirmala Sitharaman proposed significant changes to the capital gains tax regime, including lowering the LTCG tax to 12.5% from 20%. However, the proposal also included doing away with the indexation benefit for homes purchased on or after April 1, 2001. This decision was met with resistance and criticism from various quarters.

Following the backlash, the government introduced an amendment to the Finance Bill 2024 in Parliament, allowing taxpayers to choose between the old and new LTCG regimes. Taxpayers can now calculate their LTCG tax at 12.5% without indexation or at 20% with indexation and pay the lower amount. This flexibility is tailor-made for every situation, giving individuals the option to choose the most beneficial tax rate based on their circumstances.

Industry experts have welcomed the amendment, citing relief for both industry players and homebuyers. The clarity provided by the amendment prevents negative impacts on market sentiment and growth in the real estate sector, which is the second-largest employment-generating sector in India. The move is seen as a significant step forward in boosting investment across housing segments.

Experts advise careful consideration before opting for the 12.5% tax rate or the 20% rate with indexation. Factors such as property appreciation and inflation rates should be taken into account to determine the most advantageous option. The amendment provides homeowners with flexibility in managing their tax liabilities when selling their property, potentially stimulating the residential property market.

The revision is seen as a positive development that can improve homebuyers‘ sentiment and increase the overall supply of housing units in the market. This could help keep prices in check and benefit homeowners looking to minimize their tax burden. The amendment is considered rare and allows homeowners to enjoy the best of both worlds by providing options to reduce their tax liability when selling their property.

Overall, the amendment to the LTCG tax regime is expected to have a positive impact on the real estate sector, encouraging investments and boosting housing sales in the country. The flexibility provided to taxpayers and the clarity offered by the amendment are likely to stimulate growth and improve market sentiment in the industry.

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