No Changes In LTCG In Medium Term: Finance Secretary

The Finance secretary cleared the speculations that there would be no further changes in long-term capital gains tax in the medium term, addressing a post-budget session in PHD Chambers of Commerce and Industry (PHDCCI). 

He said, “For the medium term, the LTCG rates will likely remain stable at current levels.”  

Notably, the Union Budget for 2024-25 announced a 12.5 per cent long-term capital gains tax (LTCG) on all financial and non-financial assets, in effect from 23 July 2024. The proposal reduced the LTCG on multiple asset classes, including reducing the tax rate by 7.5 percent for real estate, without indexation benefits, and raising the tax rate by 2.5 per cent for listed equity from 10 per cent.

He even explained the removal of indexation in the real estate sector. “We did a study in FY 2022-23 of 10.5 lakh returns which have capital gains from land and building. On these, the effective LTCG tax rate was 11.54 per cent on real estate in 2022-23, not 10 per cent. Current LTCG is still less than the tax on salaries, interest, etc. It's a very small tax increase in LTCG on real estate,” Malhotra added.

Though changes have been made this move still gives the homeowners an option to reinvest their assets in another property without paying any LTCG tax up to a certain limit varying investment in one or two properties. 

However, if the homeowner chooses not to reinvest the money in another residential property, it would have no inflation protection anymore and has to pay an LTCG tax of 12.5 per cent on his actual gains.