In a major relief to the real estate sector, Lok Sabha on Wednesday approved the Finance Bill 2024 carrying relaxed capital gains tax provisions in respect of land or building. The Bill, which was first proposed by Finance Minister Nirmala Sitharaman in the Budget for 2024-25, provides a choice of alternative to taxpayers - to continue under the old regime with indexation benefits or go for a new lower tax rate.
Key Highlights
- New Tax Rates: The Finance Bill 2024 lowers the long-term capital gains (LTCG) tax on real estate from 20% to 12.5%, though initially without the indexation benefit.
- Amendment Introduced: Responding to criticism, Sitharaman moved an amendment allowing taxpayers to choose between the new 12.5% rate without indexation or the old 20% rate with indexation for properties purchased before July 23, 2024.
- Approval and Amendments: The bill, approved by voice vote, includes 45 official amendments and now moves to the Rajya Sabha.
Impact on Taxpayers
- Restoration of Indexation Benefit: This amendment ensures that the taxpayers who purchased properties before the mentioned date may retain its indexation, thus reducing the overall tax burden.
- Middle-Class Benefits: The Budget also suggests a raise in the tax exemption limit on long-term capital gains (LTCG) for listed equities and bonds up to Rs 1 lakh from the current threshold of Rs 1.25 lacs, offering relief for middle-class investors.
Economic and Policy Implications
- Boosting Investment: Sitharaman said the Budget is proposed to boost investment and prop up consumption, including steps such as cutting custom duties on a number of items so that trade can pick up, thereby generating employment.
- GST on Insurance Premiums: On the issue of removing GST 18% entirely from Health and Life insurance premiums, Finance Minister Nirmala Sitharaman addressed that since States used to tax these types of commodities prior to the rollout of GST, they are presently taxing at a level which gets covered in these two broad rates.
Next Steps
Now the Finance Bill 2024 will go to Rajya Sabha. The Upper House can only approve or suggest amendments but no changes should be made to this money bill and it returned to the Lok Sabha where just the advice of the Rajya Sabha is needed.
Conclusion
The Finance Bill 2024 amends several sections of the Act and is a major move towards overhauling India's tax regime, especially with regard to real estate. The responsive amendments from the government tend to suggest a readiness to adjust policy in response to feedback, shooting for that sweet spot between revenue generation and investment incentives.
CAclubindia
