Capital gains tax changes augur not so well for Realty
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Mumbai: The adjustments to the capital gains tax were implemented in the Budget, addressing a significant need. The gap between short-term and long-term capital gains has widened from 5 per cent to 7.5 per cent, which will enhance government revenue from personal income tax. Despite the increase in capital gains tax, there was no reduction or removal of the Securities Transaction Tax (STT), which is perceived as unfair to equity investors. However, the increase in STT on derivatives is a positive step towards curbing excessive speculation in futures and options (F&O) markets.
Talking to Bizz Buzz, Akhil Saraf, Founder and CEO, Reloy says, “We need to make India’s largest asset class more attractive to invest in. Last year the total investment in residential real estate by private equity funds was just $1 billion, which is less than $1 per person in India.”
If we’re treating real estate investments at par with equities, it invites serious rethinking in terms of stamp duty on resale.
Stamp duty is 5-6 per cent of property value as opposed to 0.1 per cent STT in India.
Sunil Damania, Chief Investment Officer, MojoPMS says, “The anticipated adjustments to the capital gains tax were implemented, addressing a significant need. The gap between short-term and long-term capital gains has widened from 5 per cent to 7.5 per cent, which will enhance government revenue from personal income tax.”
Despite the increase in capital gains tax, there was no reduction or removal of the Securities Transaction Tax (STT), which is perceived as unfair to equity investors. However, the increase in STT on derivatives is a positive step towards curbing excessive speculation in futures and options (F&O) markets, he said.
The Budget also reflects coalition politics, with increased allocations to Bihar and Andhra Pradesh. Given the record dividends received from the Reserve Bank of India (RBI), a higher allocation for infrastructure was anticipated, but the budget maintained the levels set in the interim budget. Overall, the Budget is favourable for macroeconomic stability but may be less encouraging for the stock market. One possible reason is the government's intention to temper the market due to its high
valuations.
