Published On: Mon, Apr 17th, 2017

Impact of shifting base date from 1/4/1981 for Capital Gain purpose

DrChaturvediBy Dr Sanjay Chaturvedi, LLB, PhD

For calculation of capital gains, all properties which were acquired before 1st April 1981 were valued as of 1st April 1981. But the Union Budget 2017 had shifted it from 1/4/1981 to 1/4/2001. A twenty years shift of base year will have vital impact on capital gains calculations. Properties which were costing 10/- at any date before 1/4/1981 were valued at 100/-. If sold at 200/- the capital gain was taken as 100/- subject to deductions.

Real Estate matured between 1981 to 2001. In these twenty years, a major change in commercialization of real estate development and housing finance. A paradigm shift of the base year will certainly impact. The base year of 1981 was higher than consumer price index, hence the benefit of higher value always given while calculating capital gain taxes. Mind you, year 2001 was year when recession was highest after a lull of 1998 to 2000. The values of properties were lowest at this date. Income tax department will earn handsomely as 2001 has become base year.

Year 2001 cannot be indicative for all properties which were brought in 1960s to 1999. As value of 1960s were negligible and were hiding behind Pugree system. Value in 1999 were also very low. All the values of properties after 2001 when market start booming. Since 2001, properties in 2011 to 2015 were enhanced to almost 1000 %. The best practice would have been to put 2007 as base year when property values were highest in last 15 years.

Year 2001 as base year will not be indicative. Consumer Price Index itself will be out of proportion. How can people calculate value with prospective values with Price Index as retrospective. The index is very important as far as cost of acquisition is concern. Shifting to year 2001 will have a hole in taxpayers pocket who have nothing but to give more tax as capital gain taxes.


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