New Delhi: Following criticism of the government’s decision to change how a tax on real estate sales was calculated, the Lok Sabha on Wednesday (August 7) passed legislation that would allow taxpayers to choose between the old and new tax rates.
“Not only are we coming up with an option, we are also saying calculate under both [tax rates] and … whichever is the lower, you pay tax on that,” finance minister Nirmala Sitharaman said while discussing an amended version of the Finance (No. 2) Bill, 2024 on Wednesday.
Sitharaman’s budget presented last month said the long-term capital gains tax on real estate sales would come down from 20% to 12.5%, but that a provision that allowed taxpayers to adjust property prices for inflation would no longer be available.
If not accounting for inflation – known as the indexation benefit – the sale values that taxpayers paid the long-term capital gains tax on would end up being higher.
When the new tax rate was announced, experts warned that tax outflows on the sale of real estate would be substantial, potentially leading to a surge in tax liabilities for investors.
They said this change would likely have far-reaching consequences for the real estate market as investors reassessed their portfolios and strategies in light of the new tax regime.
Sitharaman said on Wednesday that taxpayers would have the option of choosing between the two tax rates for transfers of land or building assets acquired by individuals and Hindu united families acquired before July 23 this year.
Real estate assets are held to be long-term capital assets if held for at least two years, Reuters reported.
Now that it has been passed the Lok Sabha, the amended Finance Bill will go to the Rajya Sabha for approval, although the upper house’s recommendations will not be binding as it is a money Bill.
Sitharaman responds to opposition protest on health insurance tax
Yesterday, MPs of the opposition INDIA bloc staged a protest on the parliament’s premises demanding a rollback of the 18% GST on health and life insurance premiums.
Addressing the protests during Wednesday’s discussion on the Finance Bill, Sitharaman said “taxes on medical insurance existed in every state before GST was introduced”.
“I ask everyone who demonstrated here today: did you ever ask your states to remove this tax? You did not,” the finance minister said in the Lok Sabha.
She added to accuse protesting MPs of not writing to representatives from their respective states who sit in the GST Council, which makes recommendations to the Union and state governments on GST-related issues.
“States have two-thirds of the representation in the GST [Council]. Did you write letters to your respective finance ministers? You did not. But you demonstrate here, saying ‘Modi ji, decrease the rate’ … What is this drama?” Sitharaman also said.
“The issue of removal of 18% GST can be decided by the GST Council. Bringing an amendment here will not serve any purpose. First the GST council will decide, then only an amendment can be brought here,” PTI quoted Sitharaman as saying.
The protest from opposition MPs came a day after the finance ministry informed the Lok Sabha that a total of Rs 24,529.14 crore had been collected as GST on health insurance premiums and re-premiums between 2021-22 to 2023-24.
Parties including the Congress, TMC, NCP (Sharad Pawar), Aam Aadmi Party (AAP), DMK, and RJD participated in the protest.
“We are determined to block this attempt to squeeze money from hard-working citizens and make essential protections unaffordable,” the TMC had said.
