Indexation loss penalises long-term asset holders

This is because for old properties would lose out on the marked differential in cost inflation index, he adds.

The changes announced under the Union Budget on the capital gains would be effective starting July 23, 2024. This means that even if an advance has been paid prior to the Union Budget 2024 announcement, but the agreement hasn’t yet been signed, then the loss on indexation would be applicable.

This will make sure that people have no reaction time and will have to pay the higher tax outgo due to foregoing the indexation benefit.

“When the asset is held for a longer period, an asset owner takes the risk of the future changes in taxation. But he will be penalised now for staying long. Earlier you were compensated as the CII for older assets was proving beneficial,” says Savla.

Apart from other capital assets, the change in the taxation structure for buyback shares would be responsible for a higher tax outgo due to the indexation benefit being taken away.

Even those investing in debentures and Units of Bonds would lose out on the indexation benefit as per the newly introduced Section 50 AA on listed and unlisted bonds.

This is a developing story.

See here: Government to allow tax collected at source to be set off against TDS on salary: Budget 2024