Removal of Indexation Benefit: A Simplified Capital Gains Framework for Real Estate Investors
Finance Minister Nirmala Sitharaman assures that the removal of indexation benefit in LTCG calculation will not lead to a higher tax burden on real estate transactions.
Real EstateLtcgIndexation BenefitCapital Gains TaxTax ReformsReal Estate MaharashtraJul 25, 2024
Industry experts agree that the removal of indexation benefits for real estate will have a limited impact on investors. A report by JM Financial Institutional Securities estimates that the change will impact returns by an average of 125-200 bps per annum, depending on historical price growth and holding periods. The impact is expected to be limited, and around 95% of sellers will not be negatively affected.
The government's intention is to simplify the capital gains framework, which currently has multiple holding periods and tax rates. By streamlining the framework, investors can expect a more straightforward and transparent system. Additionally, the concept of indexation has also been removed from mutual funds.
Experts advise investors to focus on buying stocks that can deliver superior returns, such as FMCG stocks, which look attractive from a valuation perspective. Ultimately, the removal of indexation benefit is a step towards a more simplified and efficient capital gains framework.
The Indian real estate sector has been affected by the COVID-19 pandemic, with many investors seeking clarity on the tax implications of their investments. The Union Budget 2024 aims to provide a more stable and predictable tax environment for real estate investors.
JM Financial Institutional Securities is a leading financial services company in India, providing a range of services including equity research, investment banking, and asset management.
Frequently Asked Questions
Will the removal of indexation benefit increase the tax burden on real estate transactions?
No, Finance Minister Nirmala Sitharaman has assured that the move is not aimed at increasing the tax burden on real estate transactions.
How will the removal of indexation benefit affect real estate investors?
Industry experts expect the impact to be limited, with around 95% of sellers not being negatively affected.
What is the main objective of the government's move to simplify the capital gains framework?
The government's intention is to provide a more straightforward and transparent system for real estate investors.
What are the benefits of the new LTCG regime?
The new regime is expected to benefit taxpayers in almost all cases, resulting in substantial tax savings.
How can investors maximize their returns in the current market scenario?
Experts advise investors to focus on buying stocks that can deliver superior returns, such as FMCG stocks, which look attractive from a valuation perspective.
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