As per details circulated to the members of Lok Sabha, Finance Minister Nirmala Sitharaman will propose amendments to the long term capital gains tax in the finance bill. This is as per an Economic Times report.
The proposal highlights that taxpayers can choose between a 12.5 percent tax rate without indexation or a 20 percent tax rate with indexation, selecting whichever option results in a lower tax liability.
In the recent Union Budget, Finance Minister Nirmala Sitharaman introduced changes in the long term capital gains tax. While the long term capital gains tax was reduced from 20 to 12.5 per cent, the benefit of indexation was removed. Indexation adjusts the purchase price of an investment to account for the impact of inflation.
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This move by the government attracted lots of criticisms with many saying that the loss of indexation would hit the middle class and the real estate sector as well. Speaking about the same, AAP MP Raghav Chadda said in the Parliament that the removal of indexation would led to inflow of black money in the country. He had earlier said as per reports, "Throughout the world, to woo investors to invest they are incentivised. In this country, by removing indexation we are disincentivising the investor class."
However, the Finance Minister earlier told the Times of India that people would be better off without indexation. She said, "“This perception that you will be at a disadvantage is not correct… In almost every case people have a lower tax burden under this system."
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She also mentioned that individuals with small or medium investments entering the market or property sector will benefit from it.
