INDEXATION ON SECURITIES

Normally bonds and debentures are sold at lower than face values also and if held for many years, the holder would have received interest and when he transfers it it would be loss from face value. Indexing the same always resulted in a loss being further inflated and it led to manipulations for reducing taxes. People were earning interest from these assets and after few years transfer at loss. Then they would set of this loss same year with profit from selling equities or even other capital assets. Therefore GOI took this move to plug the hole. It also affected those who sold convertible debentures at a slight profit.