MillenniumPost
Big Story

Indexation brought back; Sitharaman revises LTCG tax rules

Indexation brought back; Sitharaman revises LTCG tax rules
X

New Delhi: Union Finance Minister Nirmala Sitharaman announced an amendment to a contentious budget proposal on Wednesday, giving individual taxpayers a choice between the old regime of a 20% levy with indexation and a new system of 12.5% tax without indexation for calculating long-term capital gains (LTCG) tax.

During a session in the Lok Sabha, where the Finance Bill (No. 2) of 2024 was discussed, Sitharaman responded to MPs' inquiries, assuring them that the issue of removing GST on life and medical insurance would be addressed in the GST Council. She pointed out that states have a significant say in the council and should voice their concerns there.

Sitharaman countered opposition claims that the government favored corporations over the middle class, highlighting that corporate income tax and dividends are taxed at higher rates. She explained that dividends have been taxed at applicable rates since 2020, ensuring that wealthier shareholders pay more compared to smaller taxpayers.

The finance minister emphasized that the amendment to the LTCG proposal was in response to public feedback, a practice encouraged by Prime Minister Modi. The goal of the amendment is to simplify the law and ensure fairness across different asset classes.

Opposition members saw the amendment as a victory, but Sitharaman reminded them that the Prime Minister also represents the people's interests. Following a two-day debate, the Lok Sabha passed the money bill with the amendment.

The amendment, which applies to land and building assets acquired by individuals and Hindu Undivided Families (HUF) before July 23, 2024, allows taxpayers to choose between the new 12.5% tax rate without indexation and the old 20% rate with indexation. Sitharaman noted that this change prevents any additional tax burden.

Tax experts and government officials pointed out that this benefit does not extend to corporate firms. Dhruv Agarwala, Group CEO at Housing.com & Proptiger.com, praised the amendment as a positive step for individual taxpayers and HUFs, while noting that it does not apply to NRIs and corporations. He added that the amendment clears up confusion from the initial budget announcement and supports market sentiment and growth in the housing sector.

During the debate on the Finance Bill for 2024-25, opposition members criticized the tax proposals as favoring corporations over the poor and middle class. Shiromani Akali Dal leader Harsimrat Kaur Badal described the bill as a "tax trap" impacting all citizens but benefiting corporates. Opposition MPs urged the government to ease the tax burden on farmers and eliminate GST on life and medical insurance.

Congress leader Amar Singh accused the government of disproportionately targeting the middle class while reducing corporate taxes over the last decade. Nationalist Congress Party leader Supriya Sule called for the removal of GST on life and medical insurance to support the common man.

Next Story
Share it