The Lok Sabha has passed the Finance Bill (No. 2) for FY2024 and announced the amendment regarding the Long Term Capital Gains tax (LTCG). It allows the taxpayers the choice to either switch to a new lower tax rate or stick to the old regime with indexation benefit at higher rate.
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Finance Bill at a glance
A Finance Bill is defined in the Lok Sabha’s Rules of Procedure and Conduct of Business as a Bill that is typically introduced each year to enact the Government of India’s financial proposals for the following financial year and to give effect to enact the Government’s supplementary financial proposals at any time. Financial Bills are a part of the Union Budget. According to Article 110(a) of the Constitution of India, a finance bill must be presented along with the budget.
Another name for the Financial Bill is “Act for Appropriation of Funds for Appropriations.” Financial bills are those that pertain to fiscal matters, including government spending or revenue. It determines how much money the government intends to spend and how it plans to spend it.
Understanding the LTCG tax
LTCG are the potential profit that an individual can make for selling his investment when compared to what he paid for it which were initially invested in high-end assets like shares, property (real estate), bonds, or even commodities such as gold and silver. Capital gains are also taxable in certain jurisdictions depending on whether the asset is sold after a ‘long’ (minimum 3 years) or ‘short’ [definition needed] period. This period is usually twelve months. Its exact nature, nevertheless — what it is supposed to mean, could nonetheless be a different thing between assets. In India, they are defined differently under the Income Tax Act, 1961. A holding period of one year for equity is considered ‘long-term’, for real estate it’s two years.
As per the Union Budget 2024, the taxpayers shall pay 12.5% LTCG tax on all financial as well as non-financial assets.
Debate in Lok Sabha
The Minister of Finance of India, Nirmala Sitharaman said the amendments are made to the Finance Bill with regard to the union budget because the NDA government respects the country-wide practice of broad-based consultation so that the union budget reflects what the common man aspires for. She noted that the Budget had proposed to remove the indexation benefit with respect to all asset classes at par and not for revenue enhancement.
After rejecting the amendments made by the opposition in the house, she said “..for making things simple and easy of compliance for the taxpayer has probably guided on which in the last 10 years and if you want to look at this year as one more under a continuous third term of PM Modi, the tone among taxation (is always) about simplifying it, reducing the burden on trader or taxpayer but ensuring that it is transparent based only on revenue collections and equitable”.
Ms. Sitharaman listed some of the measures to aid the middle class as cutting in customs duty on various items which will promote trade and investment, generate employment also (no hike in direct taxes). She also mentioned about the raise in tax exemption limit on long-term capital gains in listed equities and bonds to ₹1.25 lakh from ₹1 lakh, stating that it would help people investing who invests money into the stock market.
Referring to the Opposition demand for nil GST on health and life insurance premiums, he said 75 percent of total taxes collected under GST directly goes to states. Commenting on this, she said, “..prior to the imposition of 18 percent GST on health insurance premiums, all the State Governments were charging stamp duty both life as well non-life, making it financially difficult for people. When GST was enforced, the tax automatically got subsumed into it,” she added.
Amidst an outrage that the government did not consider a proposal of opposition MPs for an amendment in the Finance Bill to remove the 18 percent GST levy on medical and life insurance premiums, they walked out.
The Finance Bill 2024 will now be sent to the Rajya Sabha, where it cannot be rejected as per constitutional provisions pertaining to money bills. It can only send back these bills, and if they do not within 14 days, the legislation is deemed as approved.
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