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Below the Quote on Quote on Union Budget by Mr Vaibhav Gupta, Partner, Dhruva Advisors

Big changes have been announced on capital gains taxes. While long term capital gains taxes have been reduced for residents on unlisted shares and real estate, it is interesting to note that the long term capital gains tax for non-residents on unlisted shares has been increased from 10% to 12.5%. This will clearly impact returns of FDI investors. Removal of cost indexation on all assets is a very significant change which will  impact real estate returns in a big way! At the same time, for Indian promoters wanting to sell their unlisted businesses, the reduction in the tax from 20% to 12.5% is a very welcome change. It brings listed and unlisted share sales at par. The other important change is that any capital gains on bonds and debentures will also be treated as short term capital gains which shall be taxed at the applicable tax rates. While changes in buyback were anticipated, however treating buyback as dividend and allowing capital loss of the cost of purchase to the shareholders is likely to reduce the attractiveness of a buyback. Reduction of the holding period to two years for long term capital gains should be a big positive for the real estate sector. Lastly, the taxability of share transfer in an offer for sale has been clarified to provide that the cost offset will be based on indexation till FY2018, which brings this at par with the sale post listing.

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