NEW DELHI: The Lok Sabha on Wednesday passed the Finance Bill 2024 after the government relaxed the much-criticised new capital gains tax on real estate, allowing taxpayers an option to switch to a new lower tax rate or stay with the old regime that had higher rate with indexation benefit.
Finance Minister Nirmala Sitharaman, who in the Union Budget for 2024-25 had proposed to lower the long-term capital gains tax on real estate to 12.5 per cent from 20 per cent but without the indexation benefit, moved an amendment to the Bill to give the option.
Indexation benefit allows taxpayers to arrive at the cost price of the property after adjusting for inflation.
The amendment came after the new provision was criticised for raising tax incidence and disincentivising investments in the real estate.
The major amendment in the Bill relates to restoration of indexation benefit on sale of properties bought prior to July 23, 2024. Now, individuals or Hindu undivided families, who purchased houses before July 23, 2024, can opt to pay long-term capital gains (LTCG) tax under the new scheme at the rate of 12.5 per cent without indexation or claim the indexation benefit and pay 20 per cent tax.
The Lower House later approved the Bill with 45 official amendments by voice vote. The Finance Bill will now go to the Rajya Sabha for discussion but the Upper House does not have powers, as per the Constitution, to reject a Money Bill. It only can return such bills and if they don’t do so within the stipulated 14 days, the legislation is considered as approved.
Sitharaman in her reply to the discussion on Finance Bill in the Lower House, also said the Budget proposals were aimed at promoting investment and benefiting the middle class.