Tax from tomorrow onwards,

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CGT is the tax that will topple the market. Not the Advance tax for increased DC rate nor the increase in registry etc. There are two opinions about this tax:

1. Govt has announced that it will be 10% of market value of property
2. Principally and logically it should be applicable to the profit proceeds on sale of property (cost of buying - sale price = profit)

However either ways, its a complete disaster.

For sale of a Kanal plot in DHA from Phase 1 to 8 which was bought and registered in last 5 years, with a current average market value of 2 Crore Rs, seller will be paying Capital Gain tax as below:

1. If 10% of market value then CGT levied alone on this plot is 20 lac Rs !!! So sell the plot of worth 2 crore and pay 20 lac as Capital Gain Tax !!!

2. A slightly lesser but equally devastating option would be to compute CGT on the actual gain (cost - profit basis) by below formula:

CGT = 10% of (MVP (Market Value of Plot) - DVP (Declared Value of plot at the time of purchase))

DVP (Declared Value of Plot declared at the time of property purchase in last 5 years) = DC Rate Value at the time of purchase = approx 70 Lac/Kanal (Average DC Rate for DHA Phase 1-5 for last 5 years)

So CGT would become = 10% of (MVP (2 Crore) - DVP (70 Lac))

= 13 lac Rs

Also remember that 1% advance tax will be added on top which will be 2 lac in this example. So total tax paid (including registry/transfer and stamp duty)= minimum 20 lac to 30 lac on a sale of every 1 kanal plot in DHA Phase 1-8 from tomorrow onwards


God help us all !!!!
:o