As the Union Budget 2026 draws near, investors and tax experts have renewed demands for refinements to the capital gains tax regime in India, but hopes of a significant overhaul of the policy are mixed. Market participants want deliverance in the form of a lower long-term capital gains (LTCG) tax rate, higher exemption limits, common holding periods for different classes of assets and restoration of indexation benefits to protect real returns from the effects of inflation.
The renewed debate is preceded by a major revamp of the capital gains regime announced in July 2024, when the government announced a uniform LTCG tax rate of 12.5% across asset classes, including equities, mutual funds, real estate, gold and bonds. While the tax rate has been standardised, the holding periods vary. Now, equity mutual funds are subject to LTCG after 1 year, with gains taxed beyond an exemption of ₹1.25 lakh, and real estate attracts LTCG tax after 2 years of holding period.
Tax experts in favour of a reduction in the LTCG rate stated that lowering the LTCG rate from 12.5% to 10% would have a direct effect on increasing post-tax returns and promote long-term investment behaviour. However, some market observers are of the view that Budget 2026 is more likely to bring incremental changes instead of a reversal of taxation rates.
Vinayak Magotra, Product Head at Centricity WealthTech and a founding team member, said a rate cut is not likely. He said equity markets are already seeing strong inflow from domestic sources, and the current LTCG rate is at a competitive level by international standards. According to him, the present structure makes a good balance with the clarity, fairness and financial consideration, and policy efforts should be made to boost more financial inclusion and make investment processes easier.
On the other hand, the founder of Alphamarket, Monjit Gogoi, said a small rate cut could be timely in view of the global market uncertainties. He added that lowering LTCG to 10% may help investors stay invested for longer and also reduce volatility in the short run. Gogoi also raised demands of the salaried class for higher income tax exemptions and the restoration of indexation benefits to ensure the taxation process reflects gains under inflation.
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