Raghav Chadha said that the withdrawal of this benefit of indexation to the investors in the Rajya Sabha would increase black money inflow.
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Who is Raghav Chadha?
Source:wikibio.in
Raghav Chadha, born November 11, 1988, is an Indian politician who serves as a member of the Aam Aadmi Party. He is the youngest Member of Parliament in the Rajya Sabha, representing the Punjab constituency.
Before his present incumbency, Chadha has served as Vice Chairman of the Delhi Jal Board and was a Member of the Legislative Assembly for the Rajendra Nagar assembly constituency in the 7th Delhi Assembly until 2022. Other than his political career, he is also a practising chartered accountant.
Chadha has been associated with the Aam Aadmi Party since its inception. At Arvind Kejriwal’s behest, he played a leading role in drafting the Delhi Lokpal Bill in 2012, which launched him into politics. Soon, he emerged as one of the big TV spokespersons of AAP and became the youngest national spokesperson of any political party.
Following the landslide victory of AAP in 2015 Delhi Legislative Assembly elections, 26-year-old Chadha was appointed as a national treasurer of the party. In April 2018, his appointment as an advisor to Manish Sisodia was revoked by the then Union Home Minister Rajnath Singh along with the sacking of nine other advisors.
What was the Benefit of Indexation?
Source: etmoney.com
Indexation is a fiscal mechanism intended to increase the purchase price of an investment by some factor on account of the impact of inflation, which would help arrive at capital gains more accurately and show the actual increase in the value of the asset over a period.
This benefit of indexation extends in particular to long-term capital gains tax calculations for any category of assets, such as real estate, gold, and mutual funds in India.
How Indexation Works:
Adjusting for Inflation: The purchase price of an asset would be compared with the Cost Inflation Index, published by the Indian government annually. CII helps compute the inflation-adjusted cost of the asset at the time it was sold.
Lower Tax Liability: This can be achieved because the capital gain—separated into sale price less purchase price, now inflated—comes down due to the purchase price inflation. As this capital gain comes down, it leads to a reduced tax liability for the investor.
How is Indexation Calculated?
Indexation, in India, is decided by the Cost Inflation Index issued year after year. It is notified every year by the central government in the official gazette and is used to inflate the purchase price of such assets to reduce the taxable capital gains.
What did Raghav Chadha say in the Rajya Sabha?
The Rajya Sabha MP from the Aam Aadmi Party, Raghav Chadha, termed the Centre abolishing the indexation benefit on the sale of old property under the Union Budget 2024 on Thursday. Chadha said this would make way for more black money to enter the country.
During the course of the debate on the Union Budget 2024-25 in Rajya Sabha, Raghav Chadha pressed the central government to reconsider their decision, warning that this is going to prevent people from purchasing their “dream homes.”
Chadha said that a proposal such as this was going to further increase corruption in the real estate sector and result in reduced investments in the industry.
“Reintroduce indexation on long-term capital gains. Across the world, investors are incentivized in one way or another.
By removing indexation in this country, we are actually disincentivizing the investor community,” he said. He added that the withdrawal of indexation was akin to “penalising investors’ rather than just levying a tax.
Raghav Chadha also said that according to the proposal from Union Finance Minister Nirmala Sitharaman in Budget 2024, people who sell old properties will pay considerably more in taxes.
Chadha said that not restoring indexation will lead to three major problems in the country. Firstly, he said investment in real estate will be negative, and hence people will not be able to buy their “dream homes.” Secondly, he said property transactions will undervalue as people will buy real estate at “circle rates,” and not disclose the actual value of the property.
He also warned that washing out indexation will result in a manifold increase in black money if the decision is not reversed. He listed a plethora of heavy taxes on the common man and asked for a wide-ranging review of direct and indirect taxes. “We pay taxes like Europeans but get services on par with sub-Saharan countries,” he remarked.
In the Union Budget 2024-25, the government cut the long-term capital gains tax on immovable properties to 12.5 percent from 20 percent but withdrew the indexation benefits used to adjust for inflation.
According to the Memorandum to the Union Budget, this rate has virtually been rationalised to 12.5 percent, and the indexation benefit available under Section 48 of the Income Tax Act for computation of long-term capital gains on most assets, including property, gold, and other unlisted assets, is proposed to be withdrawn.
Link to the X post by Raghav Chadha about the speech he delivered in the Rajya Sabha:
https://x.com/raghav_chadha/status/1816722217750729150?t=woIAPF54rl__QJ6a6V9KjQ&s=08
