“We heard the people,” finance minister Nirmala Sitharaman said in her reply to the discussion on the Finance Bill in the lower house of Parliament as she defended the changes to the capital gains tax regime that had drawn criticism.
The aim of the proposal was not to generate additional revenue but to simplify taxation, Sitharaman said, providing relief to resident individuals and Hindu Undivided Families (HUFs). The amendment provides an option to these taxpayers to choose the long-term capital gains tax (LTCG) regime that works better for them-12.5% or 20% with indexation-in the case of profits on sale of property purchased before July 23, the day the budget was announced.
‘Middle class top priority’
ET had reported the move was imminent on August 7.
She rejected the opposition accusation that her budget was anti-middle class. The finance minister said they have always been a top priority for the Narendra Modi-led NDA government.
“The argument that the middle class is losing out is not correct,” she said, highlighting the new tax regime that had led to a rise in mutual fund investments and had been adopted by 72.8% of taxpayers in the 2024-25 assessment year.
Sitharaman also said that the FY25 budget proposals were aimed at promoting investments and benefiting the middle class.
The increase in tax exemption limit on long-term capital gains in listed equities and bonds to Rs 1.25 lakh from Rs 1 lakh will benefit the middle class investing in the stock markets, she said.
The budget had also recast the income tax slabs under the new tax regime and raised the standard deduction by Rs 25,000 to Rs 75,000. This will reduce the income tax burden on the salaried by up to Rs 17,500, she had said.
The Modi government, she said, had brought in a simplified tax regime and eased compliance without drastically increasing taxes. The reduction in customs duty on various goods will promote trade and investment and generate employment, she added.
She highlighted her budget proposals aimed at simplifying compliance for both individuals and companies, including rationalisation of tax deducted at source (TDS) provisions, decriminalisation of non-deposit of TDS, and capping the time period for re-opening income tax investigations to six years, even in search cases.
“These changes are expected to significantly improve cash flow for small businesses, providing them with better financial flexibility and supporting their growth,” Sitharaman said. “Our approach has been that we bring in greater simplification of tax laws and procedures, and that we enable growth and employment in this country.”
She said the government had removed the angel tax, which had been introduced by the United Progressive Alliance government in 2012, to support the startup sector.
The bill was approved with 45 official amendments by voice vote. The Finance Bill 2024 will now go to the Rajya Sabha for discussion, but the Upper House does not have powers to reject a money bill. It can only return such bills and if the House doesn’t do so within the stipulated 14 days, the legislation is considered as approved.
In the budget, Sitharaman had proposed to reduce long-term capital gains tax on property to 12.5% from 20% but had removed indexation benefits.
The proposal had invited wide criticism, with the industry reaching out to the government to amend it to offer grandfathering and an option to choose between the lower rate or the higher rate with indexation.
Insurance, fuel
On the opposition demand to slash 18% goods and services tax (GST) on insurance premiums, she said these products had faced taxes in states. These had only been subsumed into GST.
She said the Centre transferred a substantial 76% of the GST so collected to states. However, Sitharaman said, she would relay the concerns of the members on the issue to the GST Council, which was the apex decision-making body for the levy.
She urged members to ask their respective state finance ministers to take up the issue in the council.
“I have also announced a comprehensive review of rate structure for greater simplified tax structure for the GST in the country as a whole,” she added.
She also said that opposition parties that were demanding a reduction in the central excise duty rate for petrol and diesel had raised value-added taxes in states where they were in power, citing the examples of Himachal Pradesh, Karnataka and Punjab.
Content Source: economictimes.indiatimes.com