Raghav Chadha: The LTCG regulations were modified on August 7 by Finance Minister Nirmala Sitharaman. Notably, when Finance Minister Nirmala Sitharaman unveiled the Union Budget on July 23, 2024, she eliminated the advantages of LTCG indexation, a decision that sparked criticism from a number of groups. But the administration changed this measure on August 7. AAP MP Raghav Chadha has responded to this development.
Raghav Chadha on Indexation
Raghav Chadha took to his social media platform, X (formerly Twitter), to express his views on the partial restoration of the indexation benefits. He stated, “In Parliament, I had highlighted the drawbacks of removing the indexation benefit. After listening to my speech, perhaps the Finance Minister took note and has now partially restored the indexation benefit, which I welcome. However, this partial measure is not enough; the indexation benefit should be fully restored.”
In addition, Chadha made two other recommendations for completely restoring the advantages of indexation:
- Provide Indexation benefit on assets purchased even AFTER the 24th July, 2024
- Provide Indexation benefit on ALL Asset classes, not just on immovable property.
The Amendments to LTCG Rules
The government has introduced a key change to the LTCG rules, allowing taxpayers to choose between two tax rates: 12.5% or 20%. Additionally, taxpayers now have the flexibility to select either the old or new tax regime according to their preference.
Benefits of LTCG Indexation
- Reduced Tax Liability: Indexation adjusts the purchase price of an asset for inflation, lowering taxable capital gains. For example, if you bought an asset for Rs. 100 and sold it for Rs. 150 after several years, indexation helps reduce the taxable gain by adjusting the purchase price for inflation.
- Preservation of Purchasing Power: Indexation accounts for inflation, helping to maintain the real value of investment returns and protecting against the erosion of purchasing power over time.
- Encouragement of Long-Term Investment: Indexation benefits are more significant for long-term investments, encouraging investors to hold onto their assets longer and potentially contributing to more stable financial markets.
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