Is there a relief in sight for home buyers? Nirmala Sitharaman to move Finance Bill

Finance Minister Nirmala Sitharaman will propose the Finance Bill for FY 2024-2025 in the Lok Sabha on Tuesday, aiming for its consideration and passing. This bill is crucial for enacting the Budget proposals, which need approval from both houses of Parliament.

Presented on July 23, the FY25 Budget has been under discussion in Parliament since the session began on July 22, concluding on August 12. The Lok Sabha has already passed the Appropriation (No.2) Bill, 2024, authorizing nearly Rs 140 lakh crore for central government expenditure.

In her seventh consecutive Union Budget, Sitharaman introduced significant changes. The Standard Deduction for the new tax regime increased to Rs 75,000, and the new tax regime slabs were revised. The securities transaction tax (STT) on futures and options was hiked, with the STT on the sale of options in securities raised from 0.0625% to 0.1% of the option premium, and on the sale of futures in securities from 0.0125% to 0.02%.

A major change was the increase in capital gains tax for shares from 10% to 12.5%, reducing post-tax returns by 2.5%. Additionally, the Budget proposed eliminating indexation benefits for homeowners, meaning they would pay tax on the entire profit from property sales, not the inflation-adjusted profit. This elimination has raised concerns about a significant tax burden and potential illicit financial activities in property deals, although the Income Tax department has defended the move as advantageous.

The Budget also proposed incentives for 30 lakh youth entering the job market, providing one month of PF contribution to address unemployment.

The Ministry of Finance is evaluating options for the newly announced revised Long Term Capital Gains (LTCG) regime, which aims to eliminate indexation benefits for property, gold, and other unlisted assets. One proposal is to apply the indexation change starting from FY26, giving individuals time to adjust. Another suggestion is to offer property sellers a choice between a 20% rate with indexation and a 12.5% rate without indexation, although this could complicate the process.

"The rationale is to simplify and not complicate," an official stated. While there's no plan to reverse the decision, some adjustments might be made to mitigate the impact as suggested by industry stakeholders.

The indexation benefit allowed taxpayers to adjust the acquisition cost for inflation before computing capital gains, reducing their tax liability. The government issues the Cost Inflation Index (CII) for this purpose.