Concessions: Capitals Gains Tax Exemption

With this post I intend to express the current factual scenario in the real estate sector in Maharashtra state (and I am sure the picture in other states may not be much different) and some suggestions which should help curb unaccounted money and increase the much needed investment in the infrastructure sector.
The picture in real estate sector in Maharashtra, after implementing the good intended decisions (reforms) of DeMon, RERA, GST, appears gloomy (authorities may claim otherwise) for various reasons, some of which may be as follows:
- Property deals in Maharashtra (and not a general statement, but based on information from different parts viz. Western, Northern and Eastern etc.) are almost not moving at all. Major reason for this obviously lies in the deep rooted concept of ‘black and white’ in this sector which has penetrated in the minds of builders, landowners and common citizens alike, whether in a role of a buyer or a seller.
- Due to this strong bond a common, law abiding citizen is unable to either buy a property without converting some of his accounted hard money into unaccounted or sell his property by partly receiving unaccounted money along with the accounted money from the buyers, all of whom (except he himself) preach an approach of “yahan aisa hich chalta hai, ye satyug nahi hai!” etc.
In short even now after these reforms, in reality (and realty) sector a law abiding citizen has to give up living in a fool’s (lawful?) paradise.
One of the ways to break this jinx: people returning to their routine (black) transactions by circumventing the new rules (we people are much capable in that respect) is to offer still better concessions (yes, there is still a scope for them without sacrificing government revenue) in the capital gains tax rules, which will in fact help in bringing more people into formal channel (and reduce scope for under valuation of the property) and get the much needed investments in the cash starved infrastructure sector. A good beginning is already made by increasing the base year for indexing of property value from 1981-82 to 2001-02.
This can be made further attractive by
- increasing the limit for investment under government recognised capital gains bonds from Rs. 50 lakhs to Rs. 2 crores or more.
- number of newer government infrastructure organisations requiring priority investment can also be included in this list, since currently only bonds taken under Rural Electrification Corporation or National Highways Authority qualify for this exemption. more