homeeconomy NewsBudget 2023: Luxury housing players hit after cap on deduction of reinvestment of capital gains

Budget 2023: Luxury housing players hit after cap on deduction of reinvestment of capital gains

Budget 2023: Luxury housing players hit after cap on deduction of reinvestment of capital gains
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By CNBCTV18.com Feb 1, 2023 7:09:54 PM IST (Published)

Till now, there was no limit on the total amount of deductions on the capital gains when the amount from a housing property deal was reinvested.

Finance Minister Nirmala Sitharaman has capped the benefits on deductions in long-term capital gains from the investment in residential properties and high valued luxury homes to Rs 10 crore.

The minister proposed to limit the deduction from capital gains on investment in high-end residential properties, under sections 54 and 54F of Income Tax Act.


Real estate investments are seen as a lucrative investment option for high-networth individuals, business class and those who fall under higher income tax slabs. Real estate transactions offer significant exemptions on capital gains under Sections 54 and 54F of Income Tax Act.

As per the existing norms, the capital gains arising from the sale of long term assets like residential properties are exempted from taxation if the proceeds invested in another housing property. Till now, there was no limit on the total amount of deductions.

“It has been observed that claims of huge deductions by high net-worth assesses are being made under these provisions, by purchasing very expensive residential houses. It is defeating the very purpose of these sections,” the Budget document read.

This decision of the government may adversely impact the real estate players, those mainly dealing in ultra-luxury and premium residential properties. Reacting to the development, shares of real estate  companies traded on a mixed note in the intraday session.

Saurabh Garg of NoBroker said that these announcements are aimed towards better targeting of tax concessions and exemptions.
Shares of DLF ended 2.8 percent lower at Rs 345.90. Godrej Properties shares declined 1.9 percent to Rs 1,159.40. Shares of TARC also ended with losses of close to 4 percent.
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