Allow indexation benefits for savings such as stocks, fixed deposits: Cong to govt

The Congress on Wednesday said the government's proposal of giving individuals the option to choose between two tax rates for long-term capital gains (LTCG) tax on properties is not enough.

It should also allow indexation benefits for other forms of savings such as stocks and fixed deposits. Professionals' Congress Chairman Praveen Chakravarty accused the government of "betraying" the middle and salaried class in the Union Budget through the removal of indexation and higher taxes on their savings and investment gains.

"On 23rd July, Finance Minister Nirmala Sitharaman presented the government's budget in Parliament. We welcomed certain aspects but we strongly opposed many parts of the budget. We welcomed the fact that the FM took some ideas from the Congress party's manifesto such as the employment linked incentive (ELI) scheme, the Apprenticeship Act and removing Angel tax," Chakravarty said at a press conference at the AICC headquarters here.

Among other things, we strongly opposed what the finance did to the middle class and salaried professionals, he said. Leader of the Opposition Rahul Gandhi in his response to the Budget in Parliament categorically said that this was a "betrayal of the middle class" through removal of indexation and higher taxes on their savings and investment gains, Chakravarty pointed out.

"He (Gandhi) had promised to fight for the middle class on this issue. This issue affected nearly 7 crore Indians who filed income taxes, owned or aspire to own a home and invest their savings. In this budget, effectively, through removal of indexation and increase in capital gains taxes, the taxes of salaried professionals through investment gains went up dramatically," he said.

Already, the middle class and the salaried professionals are bearing the brunt of taxation under the Modi government because for the first time in India, total income taxes paid by middle class individuals are higher than taxes paid by rich corporates, Chakravarty said.

There were huge protests on social media and in business events in cities like Mumbai where professionals came out spontaneously to protest, he said. Chakravarty said the All India Professionals' Congress and the Congress Party launched a campaign to 'Bring Back Indexation' with a petition asking people to sign it.

"We had nearly 12,000 people who signed the petition in just one day since its launch. Yesterday, the government of India announced a rollback of indexation of property gains by giving individuals the option to continue with indexation benefits. We welcome this. This is a victory to the 7 crore people that file income tax," he said.

"But this is not enough. We urge the government to allow indexation benefits for other forms of savings too such as stocks, debt, fixed deposits and so on," Chakravarty asserted. More importantly, this is a testament to middle class power and the power of democracy, he said.

"When professionals come together and raise their voice, it will be heard. This is also proof of what a strong Opposition and a concerted and united effort can achieve for the people of India. The AIPC will continue to raise issues that impact the middle class working professionals," Chakravarty said.

His remarks come a day after the government proposed significant relief for individuals who bought houses before July 23, 2024, by giving them the option to choose between two tax rates for long-term capital gains (LTCG) tax.

The Budget 2024-25 had proposed to lower the LTCG from 20% to 12.5% but removed the indexation benefits. The new rates have come into effect from July 23, 2024. The indexation benefit allowed the taxpayers to compute gains arising out of the sale of capital assets after adjusting for inflation.

The tax experts had said that the proposed changes in the Budget would raise the LTCG tax burden.

As per the amendments to Finance Bill, 2024, circulated to the Lok Sabha members on Tuesday, individuals or HuF who bought houses before July 23, 2024, can compute his/her taxes under the new scheme (@12.5% without indexation) and old scheme (@20% with indexation) and pay such tax which is lower of the two.

After the Budget presentation, the Income Tax department said that 'substantial tax savings' are expected for a vast majority of taxpayers due to a reduction in the long-term capital gains tax (LTCG) rate in the real estate sector.

As per the changes brought in the 2024-25 Budget, the government has retained the indexation benefit for the taxpayers on properties bought or inherited before 2001.