The Income Tax Bill 2025 has introduced sweeping changes to capital gains taxation, fundamentally altering how real estate investors structure their transactions. With India’s real estate market projected to contribute 13% to the GDP by 2030, these tax reforms are poised to have significant consequences for both individual property owners and institutional investors.
The revised tax provisions have been framed to enhance compliance, curb tax avoidance, and bring more transparency into the system. However, industry experts believe these changes could also create fresh challenges, particularly for those with long-term investments. One of the most notable revisions is the removal of indexation benefits for properties acquired after July 23, 2024, a move that will likely result in higher taxable gains despite a reduced tax rate of 12.5%.
Avneesh Sood, Director of Eros Group, sees this as a major shift for the industry, stating, “The removal of indexation benefits will force investors to rethink their long-term holding strategies. While a lower tax rate of 12.5% might seem beneficial at first glance, without inflation adjustments, the actual tax outgo could be much higher than before. Investors will now have to explore more structured tax planning to ensure profitability.”
Also Read: Dwarka Expressway vs SPR: Where to invest in Gurugram for better returns?
The capital gains exemption cap of Rs 10 crore per transaction is another significant change that will affect high-value property sales. Previously, investors could reinvest unlimited capital gains into another residential property to claim tax exemptions under Section 54. Now, any gains exceeding Rs 10 crore will be taxed, limiting reinvestment options for high net-worth individuals (HNIs) and large-scale investors.
Another key change relates to Joint Development Agreements (JDAs), where the taxation timeline has been revised. Under previous regulations, capital gains were taxed at the time of signing the agreement. The new bill defers taxation to the year when the completion certificate is issued, aligning tax liability with actual revenue realization for landowners. This is expected to ease cash flow burdens for developers but could also lead to delays in project planning and structuring.
Residential real estate investors are expected to be among the most impacted by these tax amendments. The tax treatment of multiple properties has changed significantly, restricting capital gains exemptions to only one reinvestment per transaction. This means investors who typically diversify their capital gains across multiple properties will no longer enjoy the same tax relief as before.
» Read More
