Capital gains tax shocker for real estate

NEW DELHI: The real estate sector was in for a shock as the government on Tuesday removed the indexation benefit on long term capital gains on unlisted assets including real estate. Though the government has reduced the long term capital gains tax from 20% to 12.5%, the removal of indexation benefit is likely to offset the reduction of tax rates.

The move sent ripples across the real estate market with realty stocks taking a hit on Tuesday. BSE Realty Index fell by 2.15% on Tuesday. Shares of Macrotech developers declined the most by 4.73%, while DLF and Godrej Properties fell by 2.7% each. Only shares of Phoenix Mills ended in green with 1.57% gains.

The finance minister in her Budget speech said that simultaneously with rationalisation of rate to 12.5%, indexation available under second proviso to Section 48 is proposed to be removed for calculation of any long-term capital gains which is presently available for property, gold and other unlisted assets.

“This will ease computation of capital gains for the taxpayer and the tax administration,” she said.