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Sep 18, 2017
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Recent low inflation means you pay more capital gains tax
Prices rising at a slower rate should be good news. But not if you have earned long-term capital gains. The consistent decline in inflation in the past 3-4 years means that long-term capital gains can no longer escape tax through indexation. Indexation takes into account the inflation during the holding period and accordingly adjusts the purchase price of certain assets. This upward revision in purchase price reduces the capital gains and brings down the tax liability.Between 2008 and 2012, consumer inflation was raging in double digits, which meant that debt fund investors were earning tax-free gains. In fact, the inflation was so high that they could book notional losses and adjust them against other taxable longterm capital gains.
Source -
http://economictimes.indiatimes.com
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