⚠️ Note: This article is based on Budget 2026 proposals and publicly available information as of August 2026. Please verify the latest details at incometax.gov.in or consult a tax advisor for personal advice.
New Income Tax Slabs (FY 2026-27)
The new tax regime, which became the default from FY 2024-25, continues to be the primary regime. Here are the applicable slabs under the new regime for FY 2026-27:
| Income Slab | Tax Rate (New Regime) |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹7,00,000 | 5% |
| ₹7,00,001 – ₹10,00,000 | 10% |
| ₹10,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
✅ Good news for middle class: Individuals earning up to ₹12,00,000 pay zero tax after the rebate under Section 87A — effectively making income up to ₹12 lakh tax-free under the new regime.
Capital Gains Tax: What Changed?
Capital gains tax on equity investments is one of the most important areas for investors. Here's where things stand:
Short-Term Capital Gains (STCG)
For equity shares and equity mutual funds held for less than 12 months:
- STCG tax rate: 20% (increased from 15% in Budget 2024)
- No basic exemption limit applies to STCG on equity
Long-Term Capital Gains (LTCG)
For equity shares and equity mutual funds held for more than 12 months:
- LTCG tax rate: 12.5% (increased from 10% in Budget 2024)
- Exemption: First ₹1,25,000 of LTCG per year is tax-free
- No indexation benefit on equity
| Asset Type | Holding Period | Tax Rate |
|---|---|---|
| Equity Shares / Equity MF | < 12 months (STCG) | 20% |
| Equity Shares / Equity MF | > 12 months (LTCG) | 12.5% (₹1.25L exempt) |
| Debt Mutual Funds | Any period | As per income tax slab |
| Real Estate | > 24 months (LTCG) | 12.5% without indexation |
| Gold / SGBs | > 24 months (LTCG) | 12.5% |
| Fixed Deposits | Any period | As per income tax slab |
What This Means for Your Portfolio
Equity Investors — Hold Longer
With STCG at 20% and LTCG at 12.5%, the incentive to hold equity for over 1 year is clear. Frequent trading is now significantly more expensive. Long-term buy-and-hold remains the most tax-efficient strategy.
Mutual Fund Investors
Equity mutual funds (held 12+ months) benefit from the 12.5% LTCG rate with ₹1.25 lakh exemption. This remains one of the most tax-efficient investment vehicles in India. Debt funds are taxed at slab rates — making them less attractive for high-income earners.
Real Estate Investors
The removal of indexation on real estate LTCG (from Budget 2024) is still in effect. Some relief was given — if your property was purchased before 2001, indexed cost can still be used. Overall, real estate as an investment has become moderately less attractive from a tax perspective.
Other Key Budget Highlights for Investors
- STT (Securities Transaction Tax) remains unchanged on equity delivery trades (0.1%) and F&O (0.02% on options)
- Sovereign Gold Bonds: SGB redemption at maturity continues to be tax-free
- NPS (National Pension System): Employer contribution deduction under Section 80CCD(2) increased — beneficial for salaried individuals
- Infrastructure push: Continued capex allocation is positive for infrastructure, defence, and railway sector stocks
- MSME and startup support: More funding and tax relaxations for startups — potential boost for unlisted startup investments
Smart Tax Strategies Based on Budget 2026
- Harvest LTCG up to ₹1.25 lakh per year — sell long-term equity positions up to ₹1.25L profit and rebuy to reset cost basis. This is tax-free under current rules.
- Prioritise equity mutual funds over direct stocks for tax efficiency and professional management
- Switch from debt MF to FD only if in 20% or lower slab — both are now taxed at slab rates for debt
- Use the new tax regime if your deductions are less than ₹3.75 lakh — it's simpler and often more beneficial
- Maximise NPS contribution through employer — the additional deduction available is a genuinely tax-efficient vehicle