Budget 2023: Market Experts Criticize Hike in Long-Term Capital Gains Tax
The budget proposal to hike long-term capital gains tax from 10% to 12.5% may discourage savings and investments, say experts.
Long Term Capital Gains TaxInvestmentsSavingsIndian EconomyBudget 2023Real Estate PuneJul 23, 2024
Citing data from the Ministry of Statistics, Bora noted that net household savings have declined sharply by Rs 9 trillion to 14.16 trillion in the three years to FY23. The removal of indexation benefits may lead to a higher tax burden on real estate sales, making investors hesitant to invest in assets taxed at a higher rate.
C S Iyer, senior investment planner, expressed disappointment at the government's move, stating that it may discourage people from investing in the stock market. However, Rohit Gera, Managing Director of Gera Developments, believes that aligning long-term capital gain tax for real estate with other financial assets is a positive move, making investment in real estate more attractive.
Retired Income Tax officer Sathyan Iyer pointed out that the hike in long-term capital gains tax will not benefit either the middle class or the rich class. However, he noted that the exemption limit for long-term capital gains tax has been increased to Rs 1.25 lakh from Rs 1 lakh, which will help taxpayers save money.
Small-scale entrepreneur Babu Nair expressed disappointment at the budget, stating that it has failed to provide benefits to any class of people. Sachin Bhandari, Executive Director and CEO of VTP Realty, believes that developers heavily reliant on investors will be adversely affected by the government's decision to rationalize long-term capital gains tax.
Experts agree that the hike in long-term capital gains tax may discourage savings and investments, ultimately affecting the Indian economy. The removal of indexation benefits and the subsequent reduction in profitability from real estate transactions may lead to investors staying away from assets that are taxed at a higher rate.
Frequently Asked Questions
What is the new long-term capital gains tax rate proposed in the budget?
The new long-term capital gains tax rate is 12.5%, up from 10%.
How will the removal of indexation benefits affect investors?
The removal of indexation benefits may lead to a higher tax burden on real estate sales, making investors hesitant to invest in assets taxed at a higher rate.
What is the impact of the hike in long-term capital gains tax on the Indian economy?
The hike in long-term capital gains tax may discourage savings and investments, ultimately affecting the Indian economy.
Who will be affected by the government's decision to rationalize long-term capital gains tax?
Developers heavily reliant on investors will be adversely affected by the government's decision to rationalize long-term capital gains tax.
What is the exemption limit for long-term capital gains tax?
The exemption limit for long-term capital gains tax has been increased to Rs 1.25 lakh from Rs 1 lakh.
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