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Critical Topics and Their Significance for the UPSC CSE Examination on August 02, 2024
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On discarding indexation for LTCG
For Preliminary Examination: Capital Gain Tax (CGT), Direct Tax, GST
For Mains Examination: GSIII: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment
Context:
Finance Minister Nirmala Sitharaman’s announcement in the Union Budget about doing away with indexation for computing long-term capital gains (LTCG) tax has not drawn much enthusiasm. She had proposed that long-term gains on all financial and non-financial assets would now be taxed at 12.5% instead of a tiered structure, albeit abandoning indexation. A memorandum explaining the provisions of the Finance Bill (2024), stated that this was to “ease computation of capital gains for the taxpayer and tax administration”
Read about:
What is Capital gain tax?
Advantages and disadvantages of LTCG
Key takeaways:
Long-Term Capital Gains (LTCG) tax is a tax on the profit made from the sale of an asset that has been held for a longer period. In many jurisdictions, including India and the US, assets such as stocks, bonds, real estate, or mutual funds are subject to LTCG tax if sold after holding them for a specified period.
Key Points About LTCG Tax:
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Holding Period: The period required to classify a gain as long-term varies by asset type and country. For example, in India, the holding period is typically 12 months for stocks and mutual funds, while it’s 24 months for real estate.
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Tax Rate: LTCG is often taxed at a lower rate compared to Short-Term Capital Gains (STCG). The specific rate can differ depending on the asset and the country’s tax laws. For instance, in India, LTCG on equity investments exceeding ₹1 lakh is taxed at 10% without the benefit of indexation.
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Indexation Benefit: In some countries, like India, you can adjust the purchase price of an asset for inflation using the Cost Inflation Index (CII) to reduce taxable gains. This is not applicable to equities but is available for real estate.
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Exemptions: There are often exemptions or deductions available for certain types of LTCG. For instance, in India, LTCG from the sale of a residential property might be exempt under Section 54 if the proceeds are reinvested in another property.
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Reporting: LTCG must be reported in the income tax return for the relevant financial year, and proper documentation of purchase and sale transactions is necessary to determine the gain accurately.
What are the types of Capital gain taxes?
What is the Cost Inflation Index?
Follow Up Question
1.Which of the following statements about capital gains tax in India is/are correct?
- Short-term capital gains on equity shares are taxed at a flat rate of 15%.
- Long-term capital gains on property are exempt from tax if invested in specified bonds.
- The holding period for considering an unlisted security as a long-term capital asset is 24 months.
- Indexation benefit is available for long-term capital gains on debt-oriented mutual funds.
Select the correct answer using the code given below:
A) 1 and 2 only
B) 2 and 3 only
C) 1, 3 and 4 only
D) 1, 2, 3 and 4
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Answer (C)
Given these points, the correct answer is: C) 1, 3 and 4 only |
- Growth in India's eight core sectors fell to a 20-month low of 4% in June, down from an adjusted 6.4% increase in May.
- This decline was driven by reduced output in most sectors, with steel production hitting a seven-month low and refinery products entering a contraction phase for the first time in five months.
- Coal production surged by 14.8%, marking its highest rate in eight months and reaching a three-month peak. In contrast, electricity generation dropped to a four-month low of 7.7% in June, falling 3.6% below May's record levels, partly due to a heat wave affecting various regions.
- Cement production saw a slight recovery, increasing by 1.9% after two months of decline, while steel output grew by just 2.7%, the slowest growth in 27 months. This slowdown in the steel and cement sectors might be linked to reduced public capital expenditure related to the general elections.
- Natural gas production grew at a slower rate of 3.3%, the weakest in 13 months, while fertilizer output improved with a 2.4% increase after five months of decline. However, refinery product output fell by 1.5%, and the contraction in crude oil production deepened to 2.6%, up from 1.1% in May.
- The Index of Core Industries, which makes up over 40% of the Index of Industrial Production (IIP), was 3.2% lower than in May. Industrial output, which had reached a seven-month high of 5.9% in May, is expected to decelerate in June.
- Aditi Nayar, chief economist at ICRA, noted that with the drop in core sector growth, the IIP is anticipated to rise by 3.5% to 5% in June.
- The decrease in core sector growth in June may be due to reduced government capital expenditure before the general elections and a slowdown in construction activity, leading to temporary reduced demand for steel and cement
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Answer (C)
Now, let's check each option in the question:
The correct options are 1, 2, 3, and 4.
Therefore, the correct answer is C. 1, 2, 3 and 4 only |
- In 2021, many southern states and a few northern states like Himachal Pradesh and Punjab reported a higher percentage of elderly residents compared to the national average, with this disparity projected to increase by 2036.
- A distinctive characteristic of East and South Asian societies is the speed at which aging is occurring, in contrast to Western countries. While the West saw a gradual rise in the elderly population over a century, South and East Asia have experienced similar increases within just 20-30 years.
- This rapid aging poses significant challenges for middle and low-middle-income countries, particularly due to insufficient social protections for the elderly, such as pensions and access to healthcare and social services. Additionally, the shift towards nuclear families exacerbates these challenges.
- East Asian nations have recognized these issues and implemented policies to address them. They have invested in health and social care through various insurance schemes and have strengthened community-level support systems.
- In contrast, India does not have a comprehensive public pension scheme, health insurance, or social care provisions comparable to those in East and Southeast Asia.
- Some welfare programs and health insurance schemes are available but are primarily targeted at elderly individuals below the poverty line. Existing data and studies reveal disparities in the availability, accessibility, affordability, and quality of services and support for older adults.
- To address these issues, it's crucial to understand the needs of older persons from their perspective and evaluate the current provisions for social protection, insurance, and healthcare. Given the fragmented nature of service provision and financing, defining the care ecosystem and developing targeted policy recommendations are essential.
- The Longitudinal Ageing Survey in India (LASI) indicates that individuals over 60 face multiple health issues, including non-communicable diseases like diabetes, hypertension, and cardiovascular conditions.
- The survey also shows how social determinants such as geographical location, class, caste, gender, employment, and pension status affect the quality of life for older adults. Many older individuals, particularly those working in the unorganised sector, lack access to pensions and other income support, highlighting significant gaps in social safety nets
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The HelpAge India Report 2024, titled “Ageing in India: Exploring Preparedness and Response to Care Challenges,” which surveyed 10 states and 20 cities, reveals significant issues in accessing financial security, healthcare, and social care.
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The survey, conducted in Tier I and Tier II cities, found that social pension coverage is inadequate and primarily benefits the middle class employed in government roles. Consequently, many older individuals reported financial insecurity and reliance on family support.
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Government health insurance programs, such as the Ayushman Bharat Scheme, are largely restricted to those below the poverty line.
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Other schemes, like the Central Government Health Scheme (CGHS) and the Employment State Insurance Scheme (ESIS), serve only government employees and those in the organized sector. Older adults often struggle with insurance claims due to lengthy processing times, deductions, and rejections
1.India is regarded as a country with a “Demographic Dividend”. This is due to (UPSC CSE 2011)
(a) Its high population in the age group below 15 years
(b) Its high population in the age group of 15-64 year
(c) Its high population in the age group above 65 years
(d) Its high total population
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Answer (b)
A demographic dividend refers to the economic benefit a country can experience when a large share of its population is in the working age group (typically 15-64 years old). This age group is both productive and has a relatively low dependency ratio, meaning there are fewer dependents (children and elderly) to support. India currently has a large young population, which presents a window of opportunity for economic growth if the right investments are made in education, skill development, and job creation |
- In Korba, located just south of the recently auctioned lithium block, a private exploration firm funded by the National Mineral Exploration Trust (NMET) has identified hard rock lithium deposits with concentrations ranging from 168 to 295 parts per million (ppm). Additional exploration may reveal even larger reserves.
- However, lithium exploration in other states has been less successful, according to the minutes from a high-level NMET committee meeting.
- In Manipur, lithium exploration efforts in Kamjong district were halted due to local opposition. The committee decided to postpone this exploration due to these local challenges.
- In Ladakh's Merak block, near the India-China border, NMET-funded lithium exploration has produced disappointing results.
- The NMET committee also advised against continuing with the proposed upgrade of lithium exploration in Assam's Dhubri and Kokrajhar districts
- Experts indicate that India's current resource classification system, which follows the United Nations Framework Classification for Resources (UNFC), does not provide adequate details to assess the economic feasibility of mining a mineral block.
- Understanding the economic viability of lithium mining is crucial due to the high costs associated with the extraction process. With global lithium prices experiencing significant declines in recent months, miners are increasingly focused on preserving their profit margins.
- Globally, most mining companies, stock exchanges, and regulatory bodies follow the Committee for Mineral Reserves International Reporting Standards (CRIRSCO) template rather than the UNFC. CRIRSCO standards require reporting economically viable reserves with high geological confidence, confirmed through pre-feasibility studies.
- Mining experts suggest that to attract private investment in the sector, India should adopt CRIRSCO-aligned international mineral reporting standards. Dr. P V Rao, co-chair of the National Committee for Reporting Mineral Resources and Reserves in India (NACRI), emphasized that without adherence to internationally recognized reporting standards, the auction system may not achieve its intended outcomes.
- Successful bidders for critical mineral blocks might not even commence operations if resource and reserve reports are not compliant with these standards.
- Since 2019, NACRI has developed and maintained the Indian Mineral Industry Code (IMIC), which CRIRSCO recognizes as compliant
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Answer (C)
Thus, statements 1 and 3 are correct, making option C the right choice |
- Higher temperatures cause air to expand, resulting in decreased density or thinning of the air. This expansion creates more space between air molecules, meaning there are fewer molecules beneath the aircraft’s wings to generate the lift needed for takeoff.
- According to Paul Williams, a professor of atmospheric science at the University of Reading, aircraft experience a 1% reduction in lift for every 3 degrees Celsius increase in temperature, as he mentioned in a 2023 interview with CNN.
- The reduced air density also impacts engine performance. With fewer oxygen molecules available, the combustion process that powers the engine is less efficient. Consequently, the thrust produced by the engines, which propels the aircraft forward, is diminished.
- As a result, planes need longer runways and more powerful engines to take off. For example, if an aircraft requires 6,500 feet of runway at 20 degrees Celsius, it will need 8,200 feet at 40 degrees Celsius, according to Williams. In extreme conditions, takeoff can become unfeasible.
- Additionally, thinner air makes landings more difficult. Pilots rely on brakes and reverse thrust (thrust directed opposite to the aircraft’s movement) to slow down during landing. In conditions of reduced air density, the reverse thrust may be insufficient to achieve the desired deceleration.
- These challenges are particularly pronounced at high-altitude airports (such as Leh), where the air is already thin and runways tend to be shorter
- The severe heat impacting aircraft take-offs and landings is a result of global warming. Since 1880, the global average temperature has risen by at least 1.1 degrees Celsius. In India, annual mean temperatures have increased by approximately 0.7 degrees Celsius compared to levels from 1900.
- Research indicates that higher temperatures have begun to affect air travel. For example, a 2020 study titled “The Impacts of Climate Change on Greek Airports” examined the performance of the Airbus A320, a widely used aircraft, at 10 Greek airports from 1988 to 2017.
- The study found that with a temperature rise of 0.75 degrees Celsius per decade since the 1970s, the maximum take-off weight of the Airbus A320 decreased by 127 kg annually, which is roughly equivalent to the weight of a passenger and their luggage. The weight of an aircraft is crucial for determining the amount of lift and thrust required for take-off.
- This problem is expected to worsen. A 2023 study titled “Decreased Aircraft Take-off Performance under Global Warming,” published by the Multidisciplinary Digital Publishing Institute (MDPI), projected that for the period 2071-2080, the take-off distance for a Boeing 737–800 at low-altitude airports would increase by an average of 6% compared to 1991-2000, necessitating an additional 113-222 meters of runway during future summers.
- Although aircraft manufacturers continuously strive to make planes lighter and more efficient, significant advancements have already been achieved.
- In the short term, airports may need to adjust flight schedules to cooler times, extend runway lengths, and reduce aircraft take-off weight to mitigate the disruptions caused by climate change
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Answer (D)
Therefore, the correct answer is: D. 1, 2, and 3 only |
| Subject | Topic | Description |
| Polity | Indian Constitution | Constitutional bodies |
| History | Ancient History | Indus Valley Civilisation (IVC) |
| Economy | NCERT Class 9 | People as a Resource |
| Geography | NCERT Class 9 | Physical Features of India |
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