In Real Estate, the Indian government has introduced significant changes to the tax on capital gains. Specific types of profits, which are still considered short-term revenues obtained from financial securities, will increase their tax rate from 15% to 20%. Also, beginning April 1, 2019, LTCG on all the financial and non-financial asset classes will attract a flat rate of 12%. 5%, increased from 10%.
The latter is a much more striking change and is suggested by reducing the indexation benefit for property sales from 1 February 2001. Indexation erases the effect of inflation on the value of an asset, thus helping to reduce taxable profits and tax outgo. If this adjustment is not provided, then property sellers will bear higher taxes even though the LTCG rate has been cut.
Some practitioners have differing opinions on the outcome of these changes. That some suggest that whether or not the result of the increase is the burden accentuation depends on the comparator used, with some indicating the effect can be even neutral and positive if considering the average property return and inflation rates assumptions.
The government has also recommended that the stamp duty be relievable for states; hence, it has come up with a proposal to cut the stamp duty for women as well to balance the changes in capital gains tax. The general real estate sector has not been fully crippled since the policy adjustments are believed to be trimmed to the net effects.
