New Delhi. Finance Minister Nirmala Sitharaman strongly defended the budget on Wednesday and said that the proposals made in it have reduced the tax burden on the middle class. Also, the exemption given in the provision of capital gains tax on house and land shows that the government is working in accordance with the expectations of the common people.
Responding to the discussion on the Finance Bill (Number Two), 2024 in the Lok Sabha, Sitharaman said that the increase in standard deduction by 50 percent has reduced the tax impact on the middle class. In true sense, the budget simplifies the tax system without increasing the tax rates. On the demand of opposition parties to reduce GST on health insurance premium, she said that before the implementation of GST (Goods and Services Tax) in 2017, the states had imposed tax on insurance premium. Sitharaman said that Parliament is not the forum to decide GST rates. This matter will have to be taken to the GST Council, in which the states have two-thirds representation.
After the reply of the Finance Minister, the Lok Sabha passed the bill by voice vote with 45 amendments. The major amendment was regarding the imposition of capital gains tax on the transaction of immovable property i.e. land and house. Opposition MPs walked out of the Lok Sabha after the amendment introduced by RSP member NK Premachandran, demanding withdrawal of 18 percent GST on medical and life insurance premium, was not discussed. The Finance Bill has amended the LTCG (long-term capital gains) tax. Under this, the benefit of indexation i.e. the effect of inflation on the sale of properties purchased before July 23, 2024 has been restored.
Now individuals or Hindu Undivided Families (HUFs) who have bought a house before July 23, 2024, can choose to pay LTCG tax under the new scheme. They will need to pay 12.5 per cent tax without indexation and 20 per cent tax with indexation benefit. They can choose the option which has a lower tax rate. Sitharaman had reduced the long-term capital gains tax on real estate from 20 per cent to 12.5 per cent without indexation benefit in the 2024-25 budget. This was criticized by various sections. They believed that LTCG would increase the tax liability.
However, the Finance Minister said in his reply that even in the calculations done under different circumstances, there has been no increase in tax liability and in case of purchase of new property, the benefit of reinvestment (rollover) of the sale amount without paying LTCG tax has been retained by the house or land owners.
Sitharaman said that the proposed change in LTCG tax rate was not aimed at generating revenue but was an effort to bring parity between similar assets. This change gives a fair choice to the property owner.
He said that to address the concerns, the option of indexation benefit has been restored for properties purchased before July 23, 2024.
Sitharaman said that since her first budget in 2019, she has been touring the country and taking suggestions from various parties and has come here with amendments to meet the aspirations of the common people. The Finance Minister also said that the budget proposals for the financial year 2024-25 are aimed at promoting investment besides benefiting the middle class. She said that increasing the tax exemption limit on long-term capital gains in listed equity shares and bonds from Rs 1 lakh to Rs 1.25 lakh will benefit the middle class investing in the stock markets.
He said that the Narendra Modi government has simplified the tax system and made compliance easier without increasing taxes heavily. The reduction in customs duty on various items will boost trade and investment and create employment. Sitharaman also said that taxpayers are now preferring the new tax system. This trend has been seen in one year. He said that a total of 7.22 crore income tax returns were filed till July 31, 2024 for the assessment year 2024-25. Out of this, 5.25 crore people or 72.8 percent opted for the new tax system.
At the same time, the number of people filing income tax returns under the new tax system in the assessment year 2023-24 was 30.93 lakh. Sitharaman said that the change in slabs in the new income tax system in 2023 resulted in tax savings of Rs 37,500 for the people. More changes were made in this in the current financial year. Also, the standard deduction has been increased from Rs 50,000 to Rs 75,000. This will provide relief of Rs 17,500 to the employed people.