[arin_12]

Originally Posted by satya_ip

Case 2: Long-Term Capital Gains

Assuming the complete Rs 4 lakh is considered as long-term capital gains:

This case is dependent on the trading pattern of a trader. An average level traders can be beneficial too while booking his long term.

[bhairavp]

Originally Posted by BHPjunkie

More money? I was paying the full quota of LIC premiums for the 80C benefits, which I keep continue paying coz if I do not now, they will forfeit my policy. Also I do not get any deduction for the same in the new regime.
I do have a driver and my own vehicle for office commutes but I cannot claim expenses paid towards him or vehicle, coz as per my company policy I have to lease a car from them to claim these expenses. I do not want to lease a vehicle because I am tied to the company from minimum 4 years else the penalties on the termination of lease are high.
Does a business owner have so many restrictions? My friends in business claim all fuel expenses driver payment, irrespective if the vehicle is being used for home or family. They even claim restaurant bills in the name of business expense.
Heck, I know of friends in business who buy the new iPhone or flagship android phone every year and claim depreciation and GST benefits in their businesses. Some of them go to the extent of buying electronics used at home (TVs, ACs, washing machine etc.) and claiming them as business expense. Where are checks and balances on this?

I get your point, but the flipside to this is - businesses are risks taken by the entrepreneurs. The government is incentivising risk taking - the business may go to zero overnight. Salaried individuals have some certainty of income, most businesses do not.

Just giving the other side of the picture here.

[Bsimhan]

Originally Posted by vaibhav_a_a

The logical step to solve the falling deposit and CASA ratio for Banks would have been to enhance tax break on savings account interest (80TTA). But when you have brute power, why would you need logic...

Absolutely correct. I am thinking that the intention of the Government is that we should stop saving (80C, 80 TTA,B) and start spending (as if that is going to happen)! Also if you look at Mediclaim insurance premiums it will be good not to take a policy if the Government were to provide health care for all. If this does happen, it will be after my time!

[whitewing]

Originally Posted by bhairavp

businesses are risks taken by the entrepreneurs. The government is incentivising risk taking - the business may go to zero overnight. Salaried individuals have some certainty of income, most businesses do not.

Just giving the other side of the picture here.

The salaried class also ride the same risk cycle as the business they are employed in. Infact their positions may be even more perilous than the businesses (look at the number of people that got the pink slip in PayTM/Byju). This logic holds true for PSU/Govt employees where there is job guarantee.

If your point is, that the salaried do not bring in any capital investments, it doesn't quite cover the case where the salaried get sweat equity.

[rkv_2401]

Originally Posted by DigitalOne

You seem to have misunderstood the meaning of average ?? MF returns have ups and downs which have averaged out to around 12% returns over a long time, which means 12% MF returns are not guaranteed for the next 3 years (the term of your loan), while the 9% EMI interest is.

Please avoid this kind of flawed logic while taking investment decisions.

Yeah. It was a very nice post full of insights, but in general returns in investments won't be able to match that of loan interest - otherwise, the banks would just invest their funds in that investment instead

I agree with the rest of it, taking loans against investments instead of liquidating (when possible) seems to be the way to go to avoid excessive taxation especially in the short-term. Especially if you are able to pay more than the minimum EMIs and reduce the principal amount left quickly.

[xway]

While everyone is discussing the LTCG topic post budget, the most important point seems to have gone under the blanket.

Cost of property should not include registration, brokerage, interest, maintenance or anything above the base price.

This is absurd when even indexation has been taken away, have a look at example below -

Property in Year 2014

50,00,000 Plot price
4,00,000 Stamp duty
2,00,000 Brokerage
40,000 Other charges
2,00,000 Property tax @20k/year X 10years
3,00,000 Maintenance @30k/year X 10years
26,00,000 Interest cost for 10years @9%

87,40,000 Total cost in 10years

Now in 2024 if I sold the plot for 80 lacs my gain will be calculated as 30 lacs and I will have to pay LTCG of 12.5% a whopping 3,75,000.

In reality I have a loss of 7,40,000 but I will have to shell out tax of 3,75,000 instead.
Making an investors total loss burden of 11,15,000.

This seems bad and unacceptable, wonder if something can be done to stop such draconian rule.

[Aviator_guy]

Originally Posted by xway

While everyone is discussing the LTCG topic post budget, the most important point seems to have gone under the blanket.

Is there any change in rules in the budget regarding evaluating property purchase price?

Earlier, purchase price included property value (as declared in sale deed), registration charges, stamp duty and also interior work done for permanent fixtures (proper bills and invoices have to be available). That's why it is always beneficial to do registration on actual value and not undervalue it in sale deed as it imapcts future LTCG tax amount during sale of property.

Not included itmes were fans/lights, appliances, movable furniture and running expenses like property tax, maintenance charges etc.

[m8002?]

Basically, this budget had 2 clear directives:
1. Discourage real estate "investments" - with these high LTCG, this will definitely happen. But like with all things of govt., it is retroactive which is a problem for everyone. This also has a lot of side effects :

• This also results in a huge inheritance tax.
• Adverse impact on investments in Stock market and gold

2. Show a smokescreen for employment. Its clear in multiple discussions with corporates that these kind of policies dont make any sense and not 1 additional job will be added because of the policy. No one will hire any additional employee to get the govt. payout. However, if someone anyways had plans to hire, they would leverage it. Authorities already failed miserably earlier assuming that reducing corporate tax will increase employment

These people at the top dont have any clue about concepts like Inflation, Demand, etc.

[thanixravindran]

Originally Posted by Roark

Is this choice of 20% LTCG with indexation and 10% without indexation for calculating LTCG? Could you please elaborate on this. As per my understanding IT is decided by the Centre and there are no separate state provisions.

Also, as per my knowledge, the circle rate/PWD rate/ready reckoner rates are only meant as an indicator for calculating property tax and stamp duty while selling. So in general, if the sell value is below the circle rate, then the stamp duty is calculated on the circle rate and that transaction is generally flagged off (with the view that perhaps there has been a cash transaction).
That is why most agreements which have a large cash component generally get the agreement done at the circle rate and excess is given in cash.

Please refer to the clarification tweet from Income tax India on RE Capital Gains for property acquired before 2001.

https://x.com/IncomeTaxIndia/status/1816516685127725434

Below is the example

[Sree]

I am totally confused about SGBs. Why should the reduction of import duty of gold matter to them. One is supposed to hold the bond for 8 years. During this period, the price increase of gold will be way more than the impact of duty reduction. Are people trading these bonds. That should definitely be discouraged. And from what I understand from Smart Cat, the government doesn’t really benefit from this.

As for real estate, my view will not be popular. But I don’t want a bubble to happen in real estate. A house should mainly be for living, not an investment in a poor country like ours.

[thanixravindran]

Originally Posted by Sree

I am totally confused about SGBs. Why should the reduction of import duty of gold matter to them. One is supposed to hold the bond for 8 years. During this period, the price increase of gold will be way more than the impact of duty reduction. Are people trading these bonds. That should definitely be discouraged. And from what I understand from Smart Cat, the government doesn’t really benefit from this.

As for real estate, my view will not be popular. But I don’t want a bubble to happen in real estate. A house should mainly be for living, not an investment in a poor country like ours.

The way I understand from previous posts in this thread is

2016 SGB August bonds are about to mature. Assume if it is purchased at 100 in 2016, pre budget price was 200. Now post budget there is a drop of 5% due to import duty cut. So bond value at maturity in few weeks also reduces as 5 days moving average is taken. So investors lost 5% due to government tweaking of duty structure.

More than market risk, Government actions lead to margin erosion. I too don't like it as I expect stability rather than abrupt changes. At least the duty could have been cut 1% each quarter for next 5 quarters. Even now, I am okay if LTCG rates are just left as it is for next 4 years instead of tweaking for revenue and 'relief'.

PS: I lost heavily when Deltacorp nosedived due to GST on betting value and subsequent tax demands.

[vaibhav_a_a]

Originally Posted by Sree

Are people trading these bonds. That should definitely be discouraged. And from what I understand from Smart Cat, the government doesn’t really benefit from this.

If one disallows trading in any commodity or instrument, the entire pricing power shifts to the producer / supplier of that commodity or instrument.

This would result in low liquidity and monopoly favoring the producer. A good example of such a commodity is diamonds - before the lab-grown diamond trend went mainstream a couple of years ago, De Beers largely directed pricing. Locally, RBI bonds are non-tradeable so you're at the mercy of the govt to give you interest while your capital remains locked.

In SGB, one can always sell or buy from the secondary market, which is what makes them so lucrative even compared to digital gold where a particular seller's product can only be sold back to that specific seller (e.g Tanishq or Augmont)

The government did benefit initially - there was a massive push for digitization of everything and replacing physical gold with digital was one of the goals. Of course, no one, least of all the GoI could foresee the rise in Gold price corresponding to covid times and continuing since then.

[volkman10]

Originally Posted by Turbanator

There must be a fine print, say residents leaving permanently, like on immigration visa etc.--

Tax clearance certificate not required for all travelers.

Serious financial irregularities: Individuals involved in serious financial irregularities, whose presence is crucial for investigations under the Income Tax Act or the Wealth Tax Act, may need a certificate.

This applies when there is a likelihood of tax demands being raised against them.

Significant tax arrears: Persons with direct tax arrears exceeding ₹10 lakh, which have not been stayed by any authority, are also required to obtain a tax clearance certificate

- A tax clearance certificate can only be requested after documenting the reasons and securing approval from the Principal Chief Commissioner of Income Tax or the Chief Commissioner of Income Tax

-The certificate, issued by the income tax authority, confirms that the individual has no liabilities under the Income Tax Act, the Wealth Tax Act, the Gift Tax Act, or the Expenditure Tax Act.

- The Ministry of Finance has proposed adding the Black Money Act, 2015, to the list of acts requiring tax clearance certificates.

-The government has assured the public that this amendment does not impose a blanket requirement for all residents to obtain tax clearance certificates.


Link:

[Aviator_guy]

Very informative article which may strike a chord for folks seeking rationality in the govt decision making for real estate investors.

https://www.moneycontrol.com/news/bu...80465.html/amp

[vaibhav_a_a]

A quick read of the article and a look at the writer's background are sufficient to reveal the message being conveyed by the FinMin and echoed by this writer.

This writer argues that the removal of indexation makes the choice of investment "agnostic'' to the asset class and that the new LTCG regime is detrimental to those property owners whose choice of property was poor.

Pls, take a moment to contrast a recently ET analysis that if your property grew at less than 9% per year, you stand to lose by removal of indexation. https://economictimes.indiatimes.com...3.cms?from=mdr. In Mumbai the CAGR for last 5 years is a grand 1% and Chennai it is 2%. This is the average.

Later in the article the writer goes on to say "If one does not wish to reinvest his entire gains in real estate simply for the sake of saving on taxes, the lower LTCG tax should be paid and the reinvestment done in superior assets " - so it is clear that the writer is indicating that real estate is an inferior asset to other classes.

Which other classes? Well, the writer is the CIO of a company that provides portfolio management services. Your guess is as good as mine regarding the ''superior'' asset class.

Anyway that is just one article from one person.

The worrying trends are as follows -

- Broken promises - in 2023 there was a rush in last week of march basis the budget announcement that LTCG with indexation benefits will apply to debt funds purchased till 31 March 2023 but not thereafter. Naturally, there was a beeline. Now it is gone with no grandfathering allowed.
- Same is the case with indexation in Real estate. Technically, this is retrospective taxation.
- Since small saving schemes pay poor returns when adjusted for inflation and taxes, with indexation gone, the general nudge is towards equities (in the name of tax simplification). Already, the new tax regime allows for a higher employer contribution in NPS (14% as opposed to 10%) but no 80C. In both, EPF above a certain threshold is taxable as are life insurance policies above a certain annual premium.
- Equities by virtue of being digital and linked to your PAN are easier to tax - some of the taxes such as STT you cant even plan for. Already, the finance secretary is batting for even higher capital gains tax: https://www.thehindubusinessline.com...le68456470.ece
- The geniuses who do the math when making these proposals are insulated from their impact by way of tax-free incomes (MPs) or inflation-linked DAs (bureaucracy, etc) and will counter any shouting from the galleys tooth and nail

So in general, it's clear, the salaried class will gradually be coaxed, cajoled and worse herded towards a single alternate income-generating avenue - equities. Alas then, dear friends, the frog shall be boiled year on year till the cuisse de grenouille is plat parfait. Bon Appetit!