The union budget 2024-2025 was presented by Nirmala Sitharaman, Minister of Finance, in the Lok Sabha on July 23, 2024. Speaking on her seventh straight budget, the FM said; India’s inflation rate is still low, stable, and nearing the 4% target. Base inflation or inflation excluding food and fuel is at 3. 1% currently.
She also said this budget envisages sustained efforts on the following nine priorities for generating ample opportunities for all: schemes that include agriculture & farmers’ welfare, employment & skilling, human resource development, and social justice, manufacturing & services, urban development, energy security, infrastructure & innovation, and research & development as well as other subsequent generation reforms.
Here is what the realty sector got in the Union Budget 2024-2025
Pradhan Mantri Awas Yojana (PMAY)
Three crore new houses with financial targets set under the Pradhan Mantri Awas Yojana, rural and urban in the country have been declared, for which the allocations are being provided.
Under the PM Awas Yojana Urban 2. 0, it will provide 1 crore homes to urban poor & middle-class families at the cost of Rs. 10 lakh crores investment. This will include the central assistance of 2.2 lakh crores, in the next 5 years. A subsidy on interest to facilitate loans at affordable rates is also planned.
Budget 2024-2025 has plans for Transit Oriented Development (TOD)
This is to maximize access to public transportation and to promote walkable and bikeable connections between people. A financial strategy for TOD has been planned for 14 large cities with a population of more than 30 lakhs.
Rental Housing
Enabling policies and regulations for efficient and transparent rental housing markets with increasing availability is also envisaged.
For industrial workers, dormitory-type accommodations will be expedited. This will be done in private-public partnership or viability gap funding, which gives finance to public-private ownership along with the commitment by the anchor industries.
Stamp Duty & Advantage for Women Who Purchase Properties:
In the Budget 2024-2025 the finance minister has said, the center will encourage the states charging high stamp duties to moderate the same. And also advantage in duties for women who purchase properties. This reform will be made as essential component in the development schemes for Urban areas.
Land related Reforms :
Land-related actions will include
1. Land administration, planning, and management.
2. Urban planning, usage, and bylaws.
Completion within 3 years through appropriate fiscal support will be encouraged.
Rural Land Related Schemes:
This will include:
1. Assignment of Unique Land Parcel Identification Number(ULPIN) or Bhu-Aadhaar for all lands.
2. Digitalization of land map. Records that will show all the boundaries of different parts of land in digital form.
3. Survey of Map Sub-Division as per current ownership
4. Establishment of land registry.
5. Linking to the farmer registry.
All this will facilitate credit flow in agricultural services.
Urban Land Related Reforms:
Land records in urban areas will be digitized with GIS Mapping. An IT-based system for property record administration, updating, and tax administration will be established. This will increase the revenue of urban local bodies.
Removal of Indexation Benefits:
Union Finance Minister Nirmala Sitharaman said and announced that the indexation benefits for property sales will no longer be available. Just a brief background of how this concerns the industry, here is a description of what indexation benefit is all about.
Earlier, Indians had the opportunity to reduce the tax on the profit that an individual makes from selling a house by claiming a relief known as the ‘indexation benefit’. This indexation was very helpful in the event of the revaluation of the purchase price of the asset in consideration of the levels of inflation.
In other words, such indexation allowed the sellers themselves to subtract a lesser amount of tax on their gains. Hence, the indexation benefits were in a way beneficial since it applies only to long-term capital gains; it made the investors stick around and sell the properties only after more time and hence, probably after higher gains. Indexation also introduced the factor of reality to make real estate an investable asset.
So, then, why did the government decide to take out Indexation Benefits?
According to the government, this will make computation of the taxpayer’s capital gains and tax administration easier.
Market Sources have mixed reviews on the removal of Indexation Benefits Budget 2024-2025:
“The indexation benefit intended to pump up the cost of the asset to the existing value and gain is calculated based on the sale consideration The difference between the actual cost of acquisition of the asset and the sale consideration will attract tax which will be a huge amount”, says Deloitte India Partner Aarti Raote.
Cutting LTCG on Property Sales Budget 2024-2025:
While presenting her Budget, Nirmala Sitharaman came out with a statement to the effect that indexation benefit would be abolished, yet she did manage to lower the LTCG (long-term capital gains) tax on the sale of house property from a hefty 20 percent to a lesser 12.5 percent.
On the same, Finance Secretary, TV Somanathan said later, during his interaction with the media, said “12.5% without indexation benefits is “higher” than 20% with indexation. In 95% of cases, this 12.5% will benefit. Due to this change, the middle class is certainly to benefit” he says.
The real estate market sources have mixed views. Some of them have expressed an opinion that a real estate transaction, bringing down the long-term capital gain tax from 20% to 12.5% is a welcome step, even if it comes with the removal of indexation benefits. This will encourage more liquidity in property transactions.
According to another market source, “the fact and purpose of trying to further simplify and rationalize the tax structure and system is well understood and established, however, the elimination of the indexation benefit even if the LTCG tax rate has been slashed down to 12.5 percent was seen as likely to enhance the probability of an increased tax burden on the real estate sector”.
The 2001 Limit in Budget 2024-2025:
The other change that the budget introduces is the clear differentiation of the property sellers depending on the date when they bought the property or when they inherited it with the year 2001 being pivotal. The Union Budget 2024-2025 has split property sellers into two categories: The two are; properties bought or inherited before the year 2001; and properties bought or inherited in the year 2001 or after.
Now, according to the Budget 2023-2025, sellers in the first category (Before 2001) continue to benefit from indexation. Also, they will enjoy the reduced LTCG tax rate of 12.5%, down from the previous 20%. Sellers in the second category lose the benefit of indexation. They too benefit from the lowered LTCG tax rate of 12.5%, but without the cushioning effect of indexation.
TDS on Sale of 50 Lakh Property:
According to a statement made by Finance Minister Nirmala Sitharaman during her budget speech. A one percent tax would be deducted from the sale of any property worth more than Rs 50 lakh that involves multiple buyers or sellers.
This means that, even though each buyer will only be paying Rs 40 lakh, both buyers will still be required to deduct TDS at the rate of 1% from the amount they pay, assuming that two buyers purchase an immovable property worth Rs 80 lakh, with each buyer becoming a half owner.
Immunity to Proxies in Budget 2024-2025:
The finance minister in her budget has proposed to provide immunity to those who make a true disclosure about the beneficial owner.
Proxies were currently penalized in the same way as the beneficial owners. This modification, however, will make it possible for more convictions and assets to be discovered in violation of the benami statute.
Currently, the crime of benami transaction carries a harsh one to seven-year prison sentence and a fine of up to twenty-five percent of the benami property’s fair market value. Both the benamidar and the owner of the benami property are covered by this.
The Union Budget 2024, however, has since modified this regulation.
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