Monday, 12 August 2024

How Veeru of Sholay explains new capital gain tax on property to Mousi.


Mousi to Jai: Beta, I have got this WhatsApp message that they have restored the indexation benefit. Is it correct Beta?

Jai : Yes, Yes Mousi ji, Hon. FM has announced in parliament that they have restored benefits of indexation. Now in case of LTCG from transfer of land and buildings purchased before 23rd July,2024, tax calculated @12.5% without indexation or @20% with indexation- whichever is lower, would be the tax liability.

Mousi : Ok Beta, so all the assets purchased upto 22nd July 2024 would be eligible for indexation, right?

Jai : Aree nahi Mousi. Only land and buildings would be eligible for this indexation benefit. Other assets like your jewellery etc. would not be eligible.

Mousi : Samjhi, got it. Achha, I have a partnership with Basanti and we had purchased a land in that firm. Indexation benefit is available for this land- hai na?

Jai : Na,na, na Mousi ji. Indexation benefit has been restored only for individuals and HUFs. Properties purchased by Firms, Companies, Associations etc. are no more eligible for indexation.

Mousi : Hmmm. Ok. My son is now an NRI and is having a non agri. land in Ramgarh. When he will be selling his land , he would be entitled for the benefits of indexation, Theek hai na?

Jai : Ab kya kahoon Mousi, even amongst Individuals and HUFs, they are giving benefit of indexation only to residents. NRIs would not get benefit of indexation now onwards.

Mousi : Beta, ek baat aur bata do-tell me one more thing. If I sell my residential house and claim exemption from capital gains by investing in another house or in C.G. bonds, whether I can invest capital gains after indexation to get full exemption?

Jai : Ab aisa hai Mousi that Indexation as concept for calculation of taxable capital gain is gone. It has been brought back only for limited purposes of tax liability determination. So for exemptions u/s. 54,54B and 54EC, amount invested would be compared with gains without indexation.
Even if you have some loss after indexation, this much loss would not be allowed to be carried forward/adjusted with other capital gains.

Mousi : Sahi hai Beta. So what you are saying is that indexation is available but only for land/building and not for other assets. If tax payer is NR or a firm/company etc., then indexation is not available. It would be used for tax calculation but can not be considered for determination of amount of loss or amount of investment to be done to get full exemption u/s.54,54B,54EC. Beta kya tumhe nahi lagta-don’t you think-that with so many ifs and buts, the law is more complicated now then earlier.

Jai : Kamaal hai Mousi. Aap to smajhti hi nahi-You don’t understand. They have mentioned it very clearly in Finance Bill memorandum that it is an exercise to simplify the act. This is their idea of simplification.

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