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

Summary

The 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.