Middle class homeowners to be hit hardest as FM revokes indexation benefits in property deals
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Middle-income homeowners are likely to face the biggest brunt of Finance Minister Nirmala Sitharaman’s decision to do away with the indexation benefits on real estate transactions, announced in her Budget speech on July 23.
This implies that real estate owners selling their property will no longer be able to adjust their purchase price using inflation, thereby reducing their capital gains.
According to industry experts, a large number of real estate owners, especially those owning residential real estate property, may see their tax burden go up significantly in the absence of indexation benefits. Before the announcement, long-term capital gains (LTCG) from property sales were taxed at 20 percent with the indexation benefits. Under the new tax regime, however, the new tax rate for long-term capital gains on property sales will be 12.5 percent without the indexation benefit.
For instance, if a property bought in 1991-92 for Rs 20,00,000 was sold in FY2009-10 for Rs 80,00,000 (assuming four times price appreciation) the indexed cost would be Rs 63.51 lakh and long-term capital gains tax payable would be around Rs 3.29 lakh under the old regime. Under the new regime, with 12.5 percent tax, the total tax outgo will be Rs 7.5 lakh for the same transaction value.
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hmm 7.5 from 3.5 approx means not that bad just doubled ,
real estate agents wont care this 
home retailers wont know this by heart (as they dont do buy sell job regularly)
it wont significantly impact sales in my opinion
@manishs Can you please explain your calculation ??
@DEEPANGEORGE It will hit the Property Dealers (Traders) more. Not too much to Home Buyers and Real Estate Investors.
Most middle-class do not constantly buy-sell property. Most people buy real estate for their own consumption. And normally they sell one to buy another. There is still no tax if the money is used for "upgrade" i.e. selling and then within a short time buying better/costlier property with the sale proceeds.
Not only STCG, LTCG or STT but worst part of today's budget is removing indexation on real estate.
Indexation used to help in fighting inflation by adjusting purchase price over the period property was hold but now it is removed too.
Plus moreover 12.5% tax on the difference between selling and buying value
This will hurt real estate sector in a long run
Sorry but if you are homeowners then u ain't middle class anymore as you ain't speaking for the masses.
MATTER OF FACT THE MERCILESSLY EXPLOITED LABOURERS CANNOT AFFORD THE HOUSES THEY HELP TO BUILD.
This step is VERY GOOD TAKEN BY GOVT to stop speculation in real estate & STOP THE FLOW OF DISHONESTLY EARNED INCOME.
Suppose Mr X purchased a property for 1 Cr in 2018
Indexation cost 1.33 Crore in 2024
Suppose Mr X sold the property for 2 Cr in July 2024
He had to pay 20% of 67 lakh which is 13.4 lakh
Suppose he sells property later this year.
He’ll have to pay 12.5% of 1 Cr
Which is 12.5 Lakh
So new rule will be beneficial for him
In case of less appreciation the new rule would badly impact seller
If property is sold at 1.5. Cr
The tax would be 34000 old and 6.25 lakh
If property is sold at 2.5 Crore would be 23.4 lakh in old and 18.75 lakh in new
Suppose same property was purchased in 2010 for 1 crore, the cost of acquisition (incl indexation) would be 2.45 Crore today.
If it’s sold at 3 Cr tax 11 lakh in old and 25 lakh in new
If it’s sold for 5 cr, assuming 5x return in 14 year
The tax 51 lakh old and 50 lakh new
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Most middle-class do not constantly buy-sell property. Most people buy real estate for their own consumption. And normally they sell one to buy another. There is still no tax if the money is used for "upgrade" i.e. selling and then within a short time buying better/costlier property with the sale proceeds.
Sorry but if you are homeowners then u ain't middle class anymore as you ain't speaking for the masses.
MATTER OF FACT THE MERCILESSLY EXPLOITED LABOURERS CANNOT AFFORD THE HOUSES THEY HELP TO BUILD.
This step is VERY GOOD TAKEN BY GOVT to stop speculation in real estate & STOP THE FLOW OF DISHONESTLY EARNED INCOME.
this is the calculation for understanding
so as OP said less appreciation means you will pay more tax in new 12.5%
let me add one thing, which is if your property growth is more than 7% CAGR (approx) then your "20% with indexation" and "12.5% without indexation" is same
VERDICT: so the threshold is 7 to 7.5% CAGR growth should be there BARE MINIMUM or else you will incur loss in tax IN 12.5% no indexation
manishs
@jennyllwilliams @TridentDG