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Below the Budget Day Input on Taxation aspects, real estate, capital gains on Listed Shares by Dhruv Chopra, Managing Partner, Dewan P. N. Chopra & Co 

Proposal to Tax buy back of shares by domestic companies in the hands of shareholders will potentially bring parity between tax implications on declaring dividends and buy back. Historically shareholders have enjoyed the benefits of a lower tax implication on buyback with savings of 12 % approx. on distribution of profits by companies in form of Buy back vs. Dividend. This benefit may no longer be available to shareholders. However, the cost of acquisition of shares bought back shall be allowed as capital loss to shareholder against any other capital gain income.

For capital gains on transfer of immovable property, the Long term capital gains tax has been rationalised from a rate of 20% to 12.5%. However the indexation benefits offered as per second proviso to section 48 for calculating the cost of acquisition have been repealed. Accordingly, the rate of tax has reduced by 7.5% but for immovable properties with long holding period, the potential tax outflows may be higher under the new tax provisions, subject to facts. Overall, the intent of our FM is to simplify the tax regime and reduce litigation, which intent is well appreciated

For Short term capital gains on listed securities tax rates hve been increased to 20% from prevailing rates of 15%.  The period of holding to determine nature of gains continues to be 12 months. As for long term capital gains on listed securities will now be taxed at an increased rate of 12.5% as against the previous rate of 10%.

This is an unexpected change by the honourable FM. One assumes the intent is to control the hype of the listed markets and create balance. Further the rationalisation of tax rates on long term capital gains at 12.5% across asset class is a move intended to simplify tax and reduce litigation, which intent is much appreciated

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