LTCG Tax: Everyone wants to get profit by investing their hard earned money in the right place. When you make a profit on an investment, the government collects a tax on it. It is called Long Term Capital Gains (LTCG) Tax. Finance Minister Nirmala Sitharaman has asked to know the opinion of investors regarding this tax. Since then, expectations of a reduction in LTCG tax in the upcoming Budget 2027 have risen. If this tax is indeed reduced in the budget, the big question is where will you save the most money – shares, mutual funds, property or gold. Let’s understand all this math.

The double burden will be reduced in the stock market

If you invest money in stock market or equity mutual fund, you have to pay 12.5 percent LTCG tax on the profit after 12 months. In this, a discount of up to 1.25 lakh rupees is available. Stock market investors will get the biggest relief if the government reduces LTCG tax in the budget. People from middle class to retirees are now investing in shares. Due to reduction in tax or elimination of STT, huge amount of profits will directly remain in their hands.

New Mathematics of Profit in Property

Investors in gold or property should hold their money for at least 24 months. After this, the profit is taxed at 12.5 percent without indexation. Cleartax CEO Archit Gupta explains that there is a special exemption on property purchased before July 23, 2024. You can choose between 12.5 percent tax or the old 20 percent tax (with indexation). If the government reduces the LTCG rate, the property seller will directly benefit. This can save millions of rupees from the pockets of real estate investors.

The savings will be determined from the after-tax return

The profit you see on your screen is not the real income. The money that comes into the bank account after deduction of tax is called post tax return. By investing in debt mutual funds, money is now deducted directly as per your income tax slab. If the government reduces the LTCG tax, the after-tax returns from equity will increase significantly. In case of low tax, investment in stock market can prove more beneficial than property as the double impact of tax on profits will be less.

What are the big expectations from the budget?

The common man has a lot of expectations from the upcoming budget. Market experts are calling for a reduction in tax rates or a change in the holding period. There is also talk of relaxing the tax rules on the profits of NRI investors. However, the government has not yet given concrete information about any changes. Therefore, experts say you should decide your investment only after looking at the current 12.5 percent tax rules. It will work like a bonus for you if taxes are reduced in the budget.