LTCG to Loot Middle Class | How will removing indexation in calculating LTCG tax affect everyone?
Today, FM
@nsitharaman reduced Long Term Capital Gains (LTCG) Tax on properties to 12.5%, but cleverly removed indexation, which adjusts the property price at the time of sale, to account for inflation. How does this impact us? Let's break it down with simple math.
Suppose you bought an apartment in January 2009 for ₹50 lakhs. Fifteen years later, you sold it today for ₹1.5 crore. With indexation, the ₹50 lakhs you paid 15 years ago is considered to be worth ₹1.32 crore today. So, the net profit or capital gain is only ₹17.5 lakhs, and you'd pay only ₹3.5 lakhs as Capital Gains Tax at the rate of 20%.
But without indexation, your capital gain now is ₹1 crore, and at 12.5%, you'd end up paying ₹12.5 lakhs in tax. Essentially, the government takes ₹9 lakhs more than the old method.
Your net profit after buying a property and holding it for 15 years is just ₹5,01,825. You might have paid much much more in loan interest alone. Was it really worth it? Do you call this cleverness or crookedness?
#Budget (1/3)