If indexation benefits are removed from Long-Term Capital Gains (LTCG) taxation, which one of the following strategies would likely become less attractive to investors? |ForumIAS

Q. If indexation benefits are removed from Long-Term Capital Gains (LTCG) taxation, which one of the following strategies would likely become less attractive to investors?

[A] Holding investments for longer periods.

[B] Investing in tax-exempt securities.

[C] Using capital losses to offset gains.

[D] Making use of tax-saving instruments.

Answer: A

Notes:

Explanation – Indexation benefits allowed investors to adjust the purchase price of an asset for inflation, thereby reducing the taxable capital gains when the asset was sold after a long holding period. Without indexation, the tax liability on long-term holdings may increase, making this strategy less attractive.

Source: The Hindu

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