Capital Gens Tax rules were changed in the budget presented last week. Taxpayers were disappointed by removing indexation benefits for long -term capital gains on selling property. The government reduced the long term capital gains tax to 12.5 per cent for several asset classes. This includes Gold, Gold and Silver Exchange Traded Funds (ETFs), Funds of Funds, International Funds and Anilisted Securities. For all these assets, the holding period has also been reduced to 24 months (in some cases 36 months) for the long term capital gains.
Negative effect of ending indexation
Such changes are generally welcome, as opportunities have increased for wealth creation in long periods with low tax. The difference has decreased due to tax on assets. For wealth creation, the investor is now over the need to be very dependent on listed shares. However, the reason for the change in the rules of the Capital Gens was due to a bad impact on the sentiments, that the indexation befit for the property’s long -term capital gains tax was abolished.
Now security will not be affected by inflation
What does it mean to homeowners? This means that the government will no longer protect the owners of the house from the effect of inflation. The price paid to buy a house for the first total holding period could be adjusted with inflation. Now, after the end of this benefit, the owner of the property will have to decide that his decision to buy the property will give good returns and it will be much higher than the inflation.
Betting on the right property will benefit
On the contrary, even if a person pays a higher price of property or buys such property that does not increase, he will still have to pay tax on the rate of purchase price and sale price at a rate of 12.5 per cent. This means that in the new system only buyers will remain, who will have the skill of investment on the right property. In the earlier system, those people also got support who did not take the right decisions of investment.
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Buying the right property will not affect much
The owner of the house up to Rs 2 crore can buy two properties from the money received from selling the property. To a limit of Rs 10 crore, he can use it to buy a second house without paying tax on the Gance. In this way, the new system is not as bad for those who use a capital gence for re -investment as it is being told. However, if the owner of the house does not use Gains’ money to buy another house, then he will not get protection from inflation and he will have to pay 12.5 percent LTCG tax on actual gains.