Union Budget 2017: Capital gains tax relief to give a big boost to realty

MUMBAI: Giving a major boost to the real estate sector, which is grappling with a severe slowdown post demonetisation, the Union Finance Budget has made several changes in the capital gain taxation provisions in respect of land and building. The government has reduced the holding period for the purpose of calculating the long-term capital gain from three years to two years.

Additionally, the base year for indexation has been shifted to April 1, 2001 from April 1, 1981 for all classes of assets including immovable property. This move will significantly reduce the capital gain tax liability while encouraging the mobility of assets.

“We also plan to extend the basket of financial instruments in which the capital gains can be invested without payment of tax,” finance minister Arun Jaitley said in his budget speech.

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This will increase the vibrancy and encourage more transactions in the real estate sector,” observed Ramesh Nair, chief executive officer and country head of JLL India.

According to him, the rationalisation of long term capital gain tax along with the change in base year for indexation benefit would also encourage overseas investors, who have been shying away from the Indian market to once again participate actively in the domestic realty space.

“More number of transactions would also lead to effiecnt price discovery in the real estate market,” he added. Manish Kumar, co-founder, REALX, a real estate e-commerce platform noted that the government has made selling homes lucrative by reducing long term capital gains period to two years.