If the removal of indexation benefits with Long Term Capital Gains (LTCG) was injury to the Indian home buyers, then insensitive comments from power corridors added insult to the injury. Track2Realty finds that certain unavoidable comments from the policy makers and their mouthpieces have not gone down well with the collective consciousness.
The Union Finance Minister Nirmala Sitharaman first removed the Indexation benefits with LTCG with retrospective effect. She then made amendments to make it only with prospective effect, with option of dual calculation – 20% with Indexation or 12.5% without Indexation. It may appear be a relief for those who have already bought a house. But in the final cost & benefit analysis, the higher tax burden is to continue for future buyer-seller in the property market.
As we analyze LTCG Indexation rollback I must say this whole controversy has poured Salt on the wounds of an average middle class Indian. If Union Budget 2024-25 was injury, then making blatant statements that real estate is not an asset has been added salt.
I don’t understand! Is this a policy paralysis or planning paralysis. More importantly, why to make irresponsible statements to defend what is indefensible. It hurts the sensibilities of an average tax paying Indian.
House is a house and can’t be an asset, said Revenue Secretary, Minister of Finance, Sanjay Malhotra after the Union Budget presentation. According to him, in 2022-23 effective LTCG was 11.54%; less than tax on salaries. Really? Is there any Duckworth-Lewis calculation in real estate as well?
Revenue Secretary says if you pocket your profit from share market then you pay tax. Why shouldn’t you pay when you don’t reinvest and pocket the profit?
My fundamental question is whether the profile of stock market investor and real estate investor is same? A property is more often than not bought with borrowed money. Then the entry & exit load of real estate is way too higher than the real estate. Add to this, the home loan interest cost and that makes real estate a loss making proposition. In contrast, stock market investment is with surplus money. No one invests in stocks with borrowed money; nor do banks finance for the same.
Another irresponsible statement from the government side has been that “those who are more capable should bear more burden than the lesser.” My question is whether the middle class is really more capable in this country?
Not every home seller is selling to make profits or to upgrade; it could be under distress also, like medical emergency, or to downgrade and use the rest amount as retirement corpus.
Is there any other social security in India, other than property and gold?
What if he sells it at a price that is below the inflation adjusted amount and then ends up paying LTCG?
If intention indeed was to curb speculation in the property market, government should have removed indexation only from commercial property and not residential ones.
Why is this government against middle class? They are highest tax payers of the country. They are also core vote bank of this government, if we look at it from political standpoint.
BJP IT Cell chief Amit Malviya was also found to be guilty of ridiculing the middle class tax payers. Immediately after the Union Budget, he had tweeted: “Tonight everyone will be indexation specialist”. He had to delete that tweet after the backlash where even some of the BJP minded twitter handles advised him against trolling citizens and acting arrogant.
There is anger among people, and rightly so. Even after the partial rollback and offering dual option for properties acquired before the Union Budget on 23rd July, 2024, cost & benefit analysis suggests nothing has changed much from the standpoint of home buyers’ overall investment horizon.
Even the supporting voices of removing Indexation also admit that this has been an abrupt change; and shouldn’t have been with immediate effect.
LTCG amendments that make it prospective and not retrospective would only help those who were in the middle of a deal but not finalized the sale.
It’s like sudden demonetization, lockdown
LTCG without indexation is same as GST, Demonetization or lockdown that hurt the cause of the informal economy and small businesses.
And more than the financial hit, it is the insensitive remarks that hurts the most.
Ravi Sinha
Twitter: RaviTrack2Media
Ravi Sinha is a journalist with over two decades of cross-discipline media exposure. He is the CEO of real estate thinktank group Track2Realty. He has been writing extensively on the real estate sector for more than a decade now. Evaluation of real estate brand performance is his core domain expertise and he has immense insight into consumers’ psychograph. He has conceptualised Track2Realty BrandXReport as India’s 1st & only objective & non-paid brand rating journal that is industry-accepted benchmark of brand equity & ranking of the Indian real estate companies.
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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