Abolition Of Indexation Benefit -Favourable or Adverse?

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	Blog Categories All Auditing (1) Current Affairs (21) Direct Tax and International Taxation (31) Indirect Tax (8) Investment (3) Others (19) Abolition Of Indexation Benefit -Favourable or Adverse? Category: Direct Tax and International Taxation, Posted on: 13/08/2024 , Posted By: CA Vishnu B Gavkare Visitor Count:34 The Budget 24 has obfuscated every taxpayer. The abolition of Indexation for LTCG has been under lot of discussion. We thought of dwelling deep in to understand the bubble. Is the lower tax rate of 20% with removal of Indexation benefit is favourable or adverse for the taxpayer? Let us delve in to the factual numbers. Let us Assume Ms. Sitharaman holds a house property which she had bought for INR. 20,00,000/-. We will assume the date of purchase being 2001, 2011 & 2021. A) scenario 1: She intends to sell this property on 23/07/2024 for INR 2,00,00,000/- In this scenario the reforms turns out to be favourable for the taxpayers B) scenario 2: She intends to sell this property on 23/07/2024 for INR 1,50,00,000/- In this scenario the shorter holding period is favourable whereas the longer holding period is adverse C) scenario 3: She intends to sell this property on 23/07/2024 for INR 75,00,000/- In this scenario as well the shorter holding period is favourable whereas the longer holding period is adverse Note: 1. The old tax rate is 20% and the new is 12.5%. the surcharge taken at 10% & the Education cess as 4% which gives us the effective tax rate of 22.88% & 14.3% respectively. Real Estate Market Insights According to a report by the National Real Estate Development Council (NAREDCO), streamlined tax policies often lead to increased market activity, fostering a healthier real estate sector. The detailed analysis seems to be aa reason as to why real estate sector rebound sharply today after the yesterdays fall post the Finance Minister’s budget speech. Conclusion The shift from an indexed tax benefit to a flat 12.5% tax rate on capital gains from Property sales marks a significant change in tax policy. While the previous reform provided some relief by adjusting for inflation, the new reform offers simplicity, predictability, and potentially encourages more transactions in the real estate sector. The examples provided illustrate the significant tax savings that taxpayers can expect under the new reforms, making it a beneficial change for those looking to sell their Property. The reform reflects a move towards a more transparent and taxpayer-friendly approach to handling capital gains tax on Property sales. Tax professionals and taxpayers alike should welcome these changes for the clarity and potential financial benefits they bring. Disclaimer: The content of the blog does not create any responsibility of the firm / its authorized persons whose website is being accessed. The blog is not for legal use. Kindly verify the correctness of data/contents from your own sources. This is only for information purpose. Add a Comment Name: Your Comment: View Comments (0)

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