Mint Quick Edit | Indexation is back, a vexation gone

livemint.com:

Faced with vocal vexation over the removal of indexation benefits for capital gains tax on property sales, the government has amended its budget proposal to restore them. For any property bought before 23 July, the day the budget was presented, people will now have the option of paying long-term capital gains tax at the time of its sale either at the new rate of 12.5% without inflation adjustment via indexation, or at the old rate of 20% with the same gain-reduction formula that prevailed before.

The move will offer relief to countless homeowners who were fearing a tax bill inflated by the rupee’s loss of purchasing power down the years. Their objection was justified, as they would have assumed no change in the tax regime when they bought property.

Retrospective changes are always upsetting. For real estate acquired from 23 July onwards, however, the lowered tax rate of 12.5% without indexation would apply.

Since it works prospectively, as should be the case with all taxes, nobody can now claim to be left short-changed. Of course, it’s another matter that India’s economy is yet to achieve the sort of price stability needed to stop inflation from warping long-term value calculations.