“This perception that you will be at a disadvantage is not realistic, it’s absolutely not correct… In almost every case people have a lower tax burden under this system.The small or the medium people who are going into the market or property investments are going to benefit from it,” she told TOI in an interview.
On Tuesday, she had announced a reduction in long term capital gains tax on property and gold from 20% to 12.5%, while withdrawing the benefit to adjust it for inflation. This came with the provision that indexation benefit will be available for properties bought up to 2001.
The FM said the amendments have been proposed with the intent to simplify the tax regime and bring all asset classes at par.
Sitharaman said the Union Budget presented on Tuesday was a continuation of the interim budget and insisted that the measures announced for Andhra Pradesh were part of the commitments given at the time of bifurcation of the state. “In Bihar’s case can anyone deny the devastation that happens because of Kosi flooding?” she said.
She also said that the skilling plan through internship was voluntary for companies and she had received suggestions for such a scheme from various industry bodies. “We’re not forcing anybody, we’ve had a lot of discussion with CII and Ficci and they thought it is possible to do it. It will actually help because they will have industry-ready people, who can be employed.”
She hit out at the Opposition, saying, “This brazen method of building a false narrative, repeating it and restating it with the hope that it will stick has been tried in the Lok Sabha elections. They are trying it even now.”
Along with the calculations released by the Central Board of Direct Taxes under different scenarios, tax authorities said, “Nominal real estate returns are generally in the region of 12-16% per annum, much higher than inflation. The indexation for inflation in in the region of 4-5%, depending on the period of holding. Therefore, substantial tax savings are expected for a vast majority of taxpayers.”
The statement further said that the new regime is beneficial for five-year old properties under the new regime which have seen an appreciation of 1.7 times or more. Similarly, for 10 years, if the value rises 2.4 times the new mechanism is seen to be beneficial. Ditto for property purchased in 2009-10 with appreciation of 4.9 times or more, the tax department said.
“It’s only where returns are low (less than about 9-11% per annum) that the earlier tax rate is beneficial, but such low returns in real estate are unrealistic and rare (less than 10% of cases),” it said.
Revenue secretary Sanjay Malhotra told TOI that benefits of reinvesting the capital gains in a new property and parking the funds in tax-exempt 54EC bonds issued by REC are intact.
Asked about the revenue impact, he said that the Centre may end up losing revenue as most taxpayers are likely to gain from the decision.
“Simplification of any tax structure has benefits of ease of compliance, including computation filing, maintenance of records. This also removes the differential rates for various asset classes,” CBDT said.
