Nifty Realty up over 1%; are the Centre's proposed amendments on LTCG tax at play?

Realty stocks have tumbled aggressively since the Budget day as the Centre announced a cut in LTCG on the sale of property from 20 per cent to 12.5 per cent but this was without indexation. Indexation aids in adjusting the purchase price of an asset for inflation, thereby reducing the gains and eventually the tax liability. Nevertheless amid broader gains, realty pack is also showing resilience, though Nifty Realty is still 3 per cent down from the Budget day levels.

The gains in the pack may even be spurred partially as the government on Tuesday proposed amendments in the Finance Bill 2024 enabling assessees to choose to compute taxes at 12.5 per cent without indexation or at 20 per cent with indexation on real estate transactions under certain conditions. As per the amendments, handed out to members of the lower house of Parliament, individual taxpayers or Hindu Undivided Families (HUF) having purchased residential property before July 23 can compute their taxes under the two options and pay tax using either option. Finance Minister Nirmala Sitharaman may move the amended Bill in Parliament on Thursday, sources told Zee Business.

However, the move is said to unlikely affect property sellers in the view of Niranjan Hiranandani, co-founder and managing director of Hiranandani Group.

At the last count, Nifty Realty traded with gains of 1.62 per cent at 1,016.85, with Macrotech Developers leading the pack with gains of up to 3 per cent.

Of the 10 constituents, 8 of them traded in the green, while two of the stocks Sobha and Phoenix traded with a cut.

The government has introduced a new rule to give people more flexibility when calculating long-term capital gains (LTCG) tax

Atul Parakh, CEO of Bigul said that the recent amendment to the finance bill has been a huge relief for middle-class homeowners who were adversely affected by the removal of indexation benefits, which caused a lot of backlash from political parties, the real estate industry and the general public.

The new amendment lets taxpayers select either a 12.5% LTCG rate without indexation or a 20% with indexation for property acquired before July 23, 2024. This reduction of tax burden will benefit homeowners will be beneficial for realty sales, and investors will infuse more capital into the realty sector due to recent amendments. The real sector as a whole can continue its growing trajectory in the long run, he added.