how long term capital gain tax rule will benefits or become curse real estate

Real estate Gurukul

23 Jul 202407:11

Summary

TLDRThe video discusses the recent budget announcement by the Finance Minister, highlighting the cancellation of an indexation benefit in the capital gains tax calculation. It explains the implications for property sellers, using an example to illustrate the increased tax burden. The host also provides insights on real estate investment strategies and market trends in Gurugram, advising viewers on factors to consider when buying property.

Takeaways

📢 The Indian Finance Minister, Nirmala Sitharaman, has announced a budget that includes the cancellation of the indexation benefit for calculating capital gains tax on real estate.
🏛 The indexation benefit, which was previously used to adjust the cost of property acquisition for inflation, has been removed, affecting how capital gains are calculated.
📉 The cancellation of the indexation benefit may result in an increase in the tax liability for those selling properties, as the cost of acquisition is no longer adjusted for inflation.
🤔 For property owners who have held their assets for a long time, the new rules could mean a higher tax on the gains when they sell, compared to the old rules.
💡 The script provides a formula for calculating the tax on capital gains, emphasizing the difference between the old and new tax calculations.
🏡 An example is given to illustrate the impact of the budget changes on a property transaction, showing a potential increase in tax from 8 lakhs to 10 lakhs.
📈 The script mentions that the tax rate on equity has increased from 10% to 12.5% and suggests that it may eventually rise to 30%.
🏘️ The speaker advises on the importance of considering various factors when investing in real estate, such as location, builder reputation, and payment plans.
📊 The market scenario in Gurugram is discussed, indicating a shift from a seller's market to a more balanced one, requiring investors to be more discerning.
🔄 The script suggests that the new budget may encourage people to invest in infrastructure bonds or new properties to avail of tax benefits.
📝 The speaker mentions Section 54 and infrastructure bonds as existing options for tax savings on capital gains from property sales.

Q & A

What was the main change announced in the budget regarding capital gains tax?
-The main change announced in the budget was the cancellation of the indexation benefit in the calculation of capital gains tax for real estate.
What is the indexation benefit in the context of capital gains tax?
-The indexation benefit is an adjustment made to the cost of property to account for inflation, which reduces the capital gains tax liability.
How was the capital gain calculated previously with the indexation benefit?
-Previously, the capital gain was calculated by using a formula that involved the indexed cost of acquisition and the selling price of the property.
What is the impact of the cancellation of the indexation benefit on property sellers?
-The cancellation of the indexation benefit will result in a higher capital gains tax liability for property sellers, as they can no longer adjust the cost of acquisition for inflation.
Can you provide an example of how the capital gains tax would be calculated under the old rules?
-Under the old rules, if someone bought a property for 20 lakhs and sold it for 1 crore after 20 years, the indexed cost of acquisition would be calculated using the inflation index, resulting in a lower capital gain and thus a lower tax liability.
What is the new method of calculating capital gains tax on property after the budget announcement?
-The new method of calculating capital gains tax is by subtracting the selling price from the actual cost of acquisition without any indexation benefit.
How will the new tax rules affect the tax liability of someone who recently sold their property?
-The new tax rules will increase the tax liability for those who recently sold their property, as they will no longer benefit from the reduced capital gain due to indexation.
What are the implications of the new tax rules for future property investments?
-The new tax rules may discourage short-term property investments due to the higher capital gains tax liability. Investors may need to consider other investment options or hold properties for a longer period to qualify for lower tax rates.
Are there any exceptions or special conditions under which the indexation benefit can still be applied?
-The script does not mention any exceptions to the cancellation of the indexation benefit. It appears that the benefit has been universally removed for real estate capital gains tax calculations.
What advice does the speaker give regarding property investment decisions in light of the new tax rules?
-The speaker advises investors to be location-specific, consider the builder's reputation, payment plans, city factors, property size, and demand and supply conditions before making property investment decisions.
What is the speaker's suggestion for those who have recently invested in property and are concerned about the new tax rules?
-The speaker suggests that investors who have recently invested in property should not worry about the new tax rules as they are still eligible for capital appreciation, and the tax on capital gains is already rebated up to 2 crores.

Outlines

00:00

📊 Impact of Budget Announcement on Capital Gain Tax

The first paragraph discusses the recent budget announcement by the Finance Minister of India, which has abolished the indexation benefit in the calculation of capital gains tax on real estate. The speaker explains the previous method of calculating capital gains, which included an indexation benefit based on inflation. They provide an example of how the tax would have been calculated under the old rules, using a formula that involved the cost of property and the indexation factor. The speaker then contrasts this with the new rules, where the tax is calculated simply by subtracting the selling price from the buying price, resulting in a potential increase in tax liability. They also mention that the new rules do not affect those who have already invested in property and are eligible for certain exemptions or rebates.

05:00

🏗️ Real Estate Market Dynamics and Investment Strategies

The second paragraph shifts focus to the dynamics of the real estate market, particularly in Gurugram. The speaker reflects on the market sentiment a year ago, when there was a rush to sell properties, and contrasts it with the current situation where the market has emerged strongly. They advise on the importance of being location-specific and considering factors such as the reputation of the builder, payment plans, and the city's demand and supply scenario. The speaker emphasizes the need for careful consideration of these factors before making an investment in real estate. They also invite viewers to contact them for more personalized advice, providing a contact number and suggesting that viewers can reach out via WhatsApp for further consultation.

Mindmap

Keywords

💡Budget Announcement

A budget announcement refers to the formal declaration of a government's financial plan, which outlines revenue and expenditure for the upcoming year. In the video's context, it is related to the Finance Minister's recent statement about changes in tax laws, specifically the cancellation of indexation benefits for capital gains tax, which is a key theme of the video.

💡Capital Gains Tax

Capital Gains Tax is a tax levied on the profit made from the sale of an asset that has appreciated in value. In the script, the presenter discusses the impact of the recent budget announcement on capital gains tax, particularly the cancellation of indexation benefits, which affects how individuals calculate their tax liabilities on property sales.

💡Indexation Benefits

Indexation benefits refer to the adjustment of the cost of an asset for inflation over the period of ownership. In the video, the presenter explains that the government has cancelled these benefits, which means taxpayers can no longer adjust the cost of their assets for inflation when calculating capital gains tax.

💡Inflation Index

An inflation index is a statistical measure that shows the rate of price increase over time. In the script, the presenter uses the inflation index to illustrate how the cost of property is adjusted for inflation, which was previously a factor in calculating capital gains tax but has now been removed.

💡Property Investment

Property investment involves buying real estate with the intention of earning income or capital appreciation. The video discusses the implications of the budget announcement on property investors, especially regarding how they calculate capital gains tax on their investments.

💡Tax Calculation

Tax calculation is the process of determining the amount of tax owed based on specific financial transactions or income. The video provides an example of how tax calculation for property sales has changed due to the removal of indexation benefits, which directly impacts the amount of tax investors must pay.

💡Selling Price

The selling price is the amount for which an asset is sold. In the context of the video, the selling price of a property is used to calculate the capital gains tax, and the presenter explains how the new tax rules affect the final tax amount due after selling a property.

💡Cost of Property

The cost of property refers to the original purchase price or the total cost incurred in acquiring the property. The video script discusses how the cost of property is factored into the capital gains tax calculation, especially in the context of the changes announced in the budget.

💡Rebate

A rebate is a partial refund or discount that reduces the amount of tax owed. In the script, the presenter mentions that the capital appreciation on property was previously eligible for a rebate up to a certain limit, which is part of the tax benefits that have been affected by the recent changes.

💡Infrastructure Bonds

Infrastructure bonds are fixed-income securities issued to finance public infrastructure projects. The video suggests investing in infrastructure bonds as an alternative to property investment, especially in light of the changes in capital gains tax.

💡Market Scenario

A market scenario refers to the current conditions and trends in a particular market. The script discusses the changes in the real estate market scenario in Gurgaon, indicating that investors need to be more discerning about location, builder reputation, and other factors when making property investments.

Highlights

The Finance Minister announced the cancellation of the indexation benefit in capital gains tax calculations for real estate.

The impact of this change will affect how capital gains are calculated for property transactions.

Previously, capital gains tax was calculated with the benefit of indexation linked to inflation.

The formula for calculating capital gains included the cost of property adjusted for inflation, known as the indexation benefit.

With the cancellation of the indexation benefit, the cost of property will be considered as is, without inflation adjustment.

The new rule simplifies the tax calculation by subtracting the selling price from the buying price.

An example calculation is provided, illustrating the difference in tax liability before and after the change.

The example shows a property bought for 20 lakhs and sold for 1 crore, with a significant increase in tax liability due to the change.

The speaker explains that the tax rate on equity has increased from 10% to 12.5%.

Investors may face a loss due to the increased tax liability without the indexation benefit.

The speaker mentions that there are provisions like Section 54 that offer tax benefits for those who reinvest in property.

Infrastructure bonds are also mentioned as an investment option to avoid capital gains tax.

The speaker advises on the importance of considering the location, builder reputation, payment plans, and city factors when investing in real estate.

The market scenario in Gurugram is discussed, highlighting the change from a buyer's market to an emerging market.

The importance of selecting the right builder and payment plan is emphasized for successful real estate investment.

The speaker provides contact information for further guidance on real estate investment.

The transcript ends with a call to action for viewers to comment, like, share, and subscribe for more informative content.