capital gains tax
Every year when the Union Budget is about to come, not only the government but also crores of investors investing money in the stock market become alert. Small changes related to tax have a direct impact on their profits and future planning. A big name among these issues is Long Term Capital Gains Tax, about which the debate gets intensified before every budget. Investors are also expecting big relief on this front from Budget 2026.
When a person sells shares, equity mutual funds, property or other investments after holding them for a long time and makes a profit, the tax levied on that profit is called Long Term Capital Gains Tax. In India, if an investor sells a listed share or equity mutual fund after holding it for at least 12 months, the gain from it is considered long term. According to the current rules, 12.5% tax has to be paid on long term profits of more than Rs 1.25 lakh in a year. At the same time, a different tax rate is applicable on selling shares in short term.
Why does this tax hurt investors?
The biggest advantage of long term investment is compounding i.e. interest on interest. Investors believe that LTCG tax weakens this strength. This tax becomes a burden for those who invest for years for retirement planning, children’s education or future needs.
Another big problem is that the effect of inflation is not added to it. That is, even if the value of the investment increases due to rising prices, tax has to be paid on the entire profit. On top of that, companies already pay tax and dividends are also taxed, so for many investors it feels like double or triple tax.
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How does tax change the way of investing?
Market experts believe that due to LTCG tax, investors avoid selling good shares. They fear that taxes will be cut. This may reduce transactions in the market and affect the process of determining the correct price. Many times people do not balance their portfolio, which increases the risk.
What is expected from Budget 2026?
Now all eyes are on Union Budget 2026. Investors are expecting the government to either reduce LTCG tax or further simplify the rules. The question is whether this time long term investment will get relief, or will this issue be postponed till the next budget. For investors, this is not just a tax but a big decision related to their future earnings.
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