Higher Subsidy Burden , Rising fertiliser and fuel subsidies could increase government spending
The Indian government has introduced changes to the capital gains tax structure, effective April 1, 2026. A key update is the introduction of a flat 12% surcharge on capital gains earned by individual or corporate shareholders from company share buybacks. This move is expected to increase the effective tax burden on such gains, replacing the earlier slab-based surcharge structure. Long-term capital gains (LTCG) on most assets, including listed shares and equity mutual funds, are taxed at 12.5% without indexation, with an exemption limit of ₹1.25 lakh [1][2][4].

The new tax structure aims to simplify the capital gains tax regime, but some industry experts believe it may increase the tax burden on investors. The Association of Mutual Funds in India (AMFI) has proposed increasing the LTCG exemption limit to ₹2 lakh and exempting equity mutual fund investments held over five years. Investors can explore exemptions under Section 54 (residential properties) and Section 54EC (specified bonds) to optimize their tax liability .

Key Risks to India Capital Market