Lachman Ludhani, Chairman and Managing Director, Evershine Group
The Income Tax Act, 2025, introduces major changes that affect many sectors, with real estate being one of the most impacted. For anyone closely involved in property development, it becomes important to understand how this updated law influences investments, transactions, and overall tax planning. The new Act aims to simplify taxation, but it also brings changes that need careful attention and timely adjustments in strategy.
Clearer Framework and Revisions
One of the key updates in the Act is the clearer and simpler treatment of capital gains tax. Real estate transactions are largely driven by capital gains rules, and the new law places these under specific clauses with simpler language for short-term and long-term gains. This helps reduce confusion in calculations and filing, making the tax process on the sale or transfer of property simpler.
The revised definitions also remove certain exceptions that earlier created uncertainty, including those related to the transfer of land linked to industrially sick companies. As a result, the tax impact on such transactions is now more clearly stated. For developers, this brings better visibility for tax planning and lowers the risk of disputes with tax authorities.
Introduction of the ‘Tax Year’
The Act replaces the earlier concepts of ‘Previous Year’ and ‘Assessment Year’ with a single ‘Tax Year’ running from April 1 to March 31. This change brings uniformity to the timeline for income calculation and tax liability. With one clear tax year in place, it becomes easier for real estate investors handling multiple properties and income streams within the same financial year. This simple alignment also reduces paperwork and streamlines compliance.
Virtual Digital Assets and Real Estate
Another important addition in the Act is the formal inclusion of Virtual Digital Assets, such as cryptocurrencies, under taxable income. For real estate professionals who are into digital payment methods or investments in digital assets, this clarity matters. Any gains from virtual assets are now clearly taxable, much like other capital assets. While the tax rate and process follow familiar lines, this clear inclusion shows that digital transactions will be closely tracked, making proper documentation essential.
Simplified Compliance
The act focuses strongly on reducing complexity and limiting disputes. In simpler language, reorganised sections and a digital-first approach to enforcement are meant to make compliance less demanding. For real estate developers, this means easier filing processes and more straightforward responses to queries or audits.
By bringing provisions such as TDS under a single consolidated section, the Act reduces administrative effort. This can save time and allow greater focus on core business operations instead of tax-related formalities. The intention to limit litigation and clarify long-pending grey areas is especially reassuring in a sector where tax disputes have often been prolonged and costly.
House Property Updates
Under Clause 21, the annual value of a property will now be taken as the higher of actual rent or fair rent, after deducting municipal taxes. Clause 22 confirms that the 30% standard deduction applies only after taxes and allows pre-construction interest to be claimed in five equal parts after possession for both let-out and self-occupied properties.
The Act also allows up to two self-owned vacant houses to have nil annual value, with no notional rent applied. This offers clear relief for individuals holding an extra property for personal use.
What This Means for Your Real Estate Ventures
Adapting to the new act will take some time, but it also creates room for better financial control in real estate. With a better grip on the tax year structure and revised capital gains rules, you are in a stronger position to plan property purchases and sales with sharper timing. By staying informed and adjusting early, you give yourself the confidence to manage taxation more smoothly, report income accurately, and stay competitive in this demanding real estate sector.
