TV Mohandas Pai has, in a social media post, questioned the government's taxation policy for property. Responding to a post by Mint, Pai said the central government's assumption of real estate price inflation does not match the Reserve Bank of India's estimates and asked for an explanation from union ministers.
"Can @IncomeTaxIndia Pl explain how they assumed property prices goes up 12-16% per year? RBI says NO, citizens need this answer," Pai wrote on X (formerly known as Twitter). He then tagged Prime Minister Narendra Modi, Union Ministers Nirmala Sitharaman, Amit Shah, Nitin Gadkari, Piyush Goyal, and the PM's Office and Finance Ministry's official X handles in the post.
He's post came after Mint's Neil Borate explained that on real estate (tax), 10 per cent is the dividing line. If your house price is up less than 10 per cent, you will pay less tax post Budget. Otherwise more tax. "Why? Because indexation is gone. RBI House Price data shows sub-10 per cent growth in most cities. So most people will pay MORE tax," Borate wrote.
An analysis by Mint showed that selling your property under the revised long-term capital gains (LTCG) tax regime, announced in Budget 2024 and effective from July 23, could push liability up by over 1000 per cent.
The shift from a 20 per cent LTCG tax rate with indexation benefits to a reduced rate of 12.5 per cent without indexation could "dramatically" push citizen's property sales tax burden — especially for those who have seen modest appreciation in their investments, the analysis found.
Taxable gains will now be calculated based on the original purchase price, potentially leading to a higher tax liability than the older regime, where indexation was applied. However, properties held before 2001 will be valued at fair market value as on 1 April, 2001.
The Income Tax Department assumes annual nominal real estate returns between 12-16 per cent, compared to the Centre's cost inflation index (CII), which indicates an inflation rate of only 4-5 per cent.
The change in real estate tax promises "substantial tax savings" for most taxpayers, as per the I-T department, but data from Knight Frank and RBI Housing Price Index, showed compound annual growth rates (CAGR) in real estate over the last two, five, and 10 years ranging between 1-7 per cent. The RBI Housing Price Index data also finds that the overall market trend is subdued, with only some exceptions.
