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According to recent data, 70% of investors stop SIP within 3 years. Market experts believe that the increased rate of LTCG tax and market instability are discouraging investors. How much long term capital gains tax is applicable on equity SIP gains? What changes has the government made? Know everything…
Why do we invest? The answer is simple to make your dreams come true and achieve financial freedom. The biggest tool for investing in mutual funds and equities is the magic of compounding, and this magic works only when you give your investment a long time. But there seems to be a deep gap between reality and expectations. Recent figures are shocking. 70 percent of investors close their SIP within 3 years, and only 30 percent are able to overcome this time limit. When the entire concept of mutual funds is for the long term, why are investors leaving the field so quickly? Is it the fear of market volatility, or the rising burden of Long Term Capital Gains (LTCG) tax? Complete Circle CIO Gurmeet Chadha has appealed to Finance Minister Nirmala Sitharaman to take note of this serious crisis and reconsider the LTCG tax.
Earlier, Aam Aadmi Party MP Raghav Chadha had said in Parliament that high taxes are discouraging long-term investors. “Investment in India is highly taxed. We have seen over the last few years that global capital is very volatile. As a result, from January 2025 to the second week of December 2025, foreign portfolio investors have pulled out Rs 1.6 lakh crore from Indian equities,” Raghav Chadha said in the Rajya Sabha. After this he also added that when foreign investors are continuously selling in the Indian market, then it becomes very important to encourage domestic small investors.
What is the capital gains tax applicable on equity?
Currently, if you invest in equities or equity-oriented mutual funds and sell it after holding it for more than 12 months, the profit on it is considered Long Term Capital Gain (LTCG).
How much is LTCG tax on equity?
The long term capital gains tax rate is currently 12.5 percent. There is no tax on profits up to Rs 1.25 lakh in a financial year, but 12.5 percent tax has to be paid on profits above this.
What changes did Finance Minister Nirmala Sitharaman make?
In the budget of July 2024 (Full Budget 2024-25), the Finance Minister had made major changes in the capital gains tax, which became effective from 23 July 2024. The government has increased the LTCG rate from 10 percent to 12.5 percent. However, to provide some relief to small investors, the tax-free profit limit has been increased from Rs 1 lakh to Rs 1.25 lakh.
