Impact of Capital Gain Tax on the Real Estate Sector

Introduction 

After gaining independence, Chandigarh became the first planned city designed by Le Corbusier, exemplifying modern urban planning. It has significantly influenced the development of new towns and townships. The opening of the economy in 1991, coupled with an influx of people migrating to urban areas in search of better opportunities and improved living standards, led to a boom in the real estate sector. India is currently one of the fastest-growing economies in the world. The real estate sector is a significant contributor to this growth, ranking as the third-largest recipient of Foreign Direct Investment (FDI), the second-largest employer in the country, and contributing approximately 7.3% to the nation’s Gross Domestic Product (GDP). Although the government does not publish an official breakdown of how much each sector contributes to various tax revenues, government reports state  ₹8,681.34 crore was collected from Long-Term Capital Gains (LTCG) in the fiscal year 2022-23, a 15% increase over the previous fiscal year’s collection where the real estate sector also plays a significant role. Therefore, in this paper, we analyze the impact of the current changes in the budget on the real estate sector.

Current State of the Indian Taxation System

Today, India levies two types of tax: Direct Tax and Indirect Tax. Direct tax is imposed directly on an individual responsible for paying it, e.g.income tax. In contrast, indirect tax involves a levy on one person, but the responsibility for paying that tax to the government falls on someone else, e.g.Goods and Service Tax.

Income Tax is levied on the income and profits of an individual that he has earned during a financial year.

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