CBDT Chairman Defends Removal of Indexation Benefits in Real Estate

CBDT Chairman Ravi Agrawal argues that removing indexation benefits from real estate transactions, in favor of a simplified tax regime, benefits taxpayers when viewed through actual market dynamics. The new Budget reduces LTCG tax rates but eliminates indexation, which adjusts property prices for inflation. Despite mathematical concerns, market data suggests higher property appreciation.

The removal of indexation benefits from real estate transactions is beneficial for taxpayers, as argued by CBDT Chairman Ravi Agrawal on Wednesday. He emphasized understanding the issue through 'actual market dynamics.'

In a post-budget interview with PTI, Agrawal disclosed that calculations were conducted before the Union Finance Minister announced the measure. The new system entails a 'less tax obligation' for taxpayers.

Significantly, the Budget 2024-25 reduces tax rates on long-term capital gains (LTCG) from real estate sales but removes the indexation benefit. LTCG tax has shifted from 20% with indexation to 12.5% without it. Indexation adjusts purchase prices to inflation. Agrawal stated demands for simplifying the capital gains regime prompted this move, arguing that higher market rates and property appreciation make the new system advantageous.

(With inputs from agencies.)