During the ongoing Budget Session, Rahul Gandhi, the Leader of the Opposition in the Lok Sabha, strongly criticized the Narendra Modi-led BJP government, alleging that the 2024 Budget has betrayed the middle class.
Gandhi asserted, "The BJP government has betrayed the middle class. By eliminating indexation benefits, the government has stabbed the middle class in the back. The increase in long-term capital gains (LTCG) tax has struck at its heart."
In his speech, Gandhi drew on the 'Chakravyuh' metaphor from the Mahabharata, suggesting that the government has constructed a modern-day Chakravyuh that ensnares farmers, students, the middle class, and other sections of society.
The removal of indexation benefits for long-term capital gains on real estate, as announced in the Union Budget 2024, has sparked significant backlash. Critics argue that this change, effective from July 23, 2024, could severely impact the real estate market.
At the 2024 Business Today Budget Roundtable, Finance Minister Nirmala Sitharaman responded to these concerns, emphasizing that the government's intent was to simplify and rationalize the tax system for all taxpayers, not just the middle class.
Similarly, at the India Today-Business Today Budget Roundtable 2024, Ajay Seth, Secretary of the Department of Economic Affairs (DEA), addressed questions about the rationale behind the removal of indexation benefits. He explained, "Historically, our taxation policy was designed to direct investments toward specific asset classes through tax incentives. However, we have moved away from this approach. The Finance Minister's vision, as outlined in the Direct Tax Code, is to create a more equitable taxation system that treats all asset classes and investors equally."
Conversely, a report by BankBazaar has highlighted potential concerns for property owners, who may face a significant increase in long-term capital gains (LTCG) tax obligations due to the new regulations. The report suggests that tax liabilities could soar by as much as 290% for properties acquired after 2010.
Indexation involves adjusting the original purchase price of an asset, such as real estate, to account for inflation over time. This adjustment aims to provide a more accurate calculation of taxable capital gains upon the sale of the property, mitigating the effects of inflation.
The Union Budget 2024 has altered the capital gains tax treatment across various asset types, including equity, debt, gold, mutual funds, and property. These changes in holding periods for short-term and long-term capital gains will impact investments across these sectors.