Turning Lakhs Into Crores: The Real Power of Compounding Over 20 Years

Power of Compounding Explained: How Large a Corpus Can ₹4,00,000, ₹9,00,000, and ₹15,00,000 One-Time Investments Create in 20 Years?

When people talk about wealth creation, the phrase you’ll often hear is “power of compounding.” But what does it really mean? Is it just a financial buzzword, or is there a real magic behind it?

To put it simply, compounding is like planting a tree. You sow a seed today, water it, and let time do its work. With patience, that tiny seed grows into a big tree, bearing fruits and shade. The same happens with your money: invest it wisely, and with time, your wealth multiplies many times over.

Now, let’s make it real with numbers. Suppose you put aside one-time lump sum investments of ₹4,00,000, ₹9,00,000, and ₹15,00,000 and just let them grow for 20 years. How much could they turn into?

Let’s break it down.

Understanding Compounding in Simple Words

Before jumping into calculations, here’s a quick explanation.

• Simple Interest grows only on the original amount you invest (the principal).

• Compound Interest grows on both the principal and the interest earned.

That means your money is not just working for you — the interest you earn also starts working. It’s like money giving birth to more money.

Formula (for those who like math):

A=P(1+r/n)ntA = P (1 + r/n)^{nt}A=P(1+r/n)nt

Where:

•              A = Amount after time

•              P = Principal (initial investment)

•              r = Annual interest rate

•              n = Number of times interest is compounded per year

•              t = Time in years

For simplicity, let’s assume annual compounding at an average return rate of 10% per year (a realistic long-term expectation from equity mutual funds or stock markets).

Scenario 1: ₹4,00,000 One-Time Investment

If you put ₹4,00,000 today and let it grow for 20 years at 10% annually:

A=4,00,000(1+0.10)20A = 4,00,000 (1 + 0.10)^{20}A=4,00,000(1+0.10)20 A=4,00,000×6.727A = 4,00,000 \times 6.727A=4,00,000×6.727 A≈₹26.9lakhA ≈ ₹26.9 lakhA≈₹26.9lakh

👉 So, your ₹4 lakh grows to nearly ₹27 lakh in 20 years.

That’s almost 7 times your money without lifting a finger.

Scenario 2: ₹9,00,000 One-Time Investment

Now, let’s say you invested ₹9,00,000 instead.

A=9,00,000(1+0.10)20A = 9,00,000 (1 + 0.10) ^{20}A=9,00,000(1+0.10)20 A=9,00,000×6.727A = 9,00,000 \times 6.727A=9,00,000×6.727 A≈₹60.5lakhA ≈ ₹60.5 Lakha≈₹60.5lakh

👉 Your ₹9 lakh grows to about ₹60.5 lakh in 20 years.

Notice how the growth isn’t just proportional. You’re giving your money more time and base to compound, so it grows significantly bigger.

Scenario 3: ₹15,00,000 One-Time Investment

Now, let’s take a larger amount — ₹15,00,000 invested once.

A=15,00,000(1+0.10)20A = 15,00,000 (1 + 0.10)^{20}A=15,00,000(1+0.10)20 A=15,00,000×6.727A = 15,00,000 \times 6.727A=15,00,000×6.727 A≈₹1crore(₹1.01croreapprox.)A ≈ ₹1 crore (₹1.01 crore approx.)A≈₹1crore(₹1.01croreapprox.)

👉 Your ₹15 lakh grows into ₹1 crore in 20 years.

This is the true power of compounding. That one-time investment creates a crore-plus corpus without you having to invest again.

Compounding: The Silent Multiplier

At first glance, the numbers may seem straightforward. But the real magic lies in how money snowballs over time.

Take a look at this rough 10% growth projection:

Year        Value of ₹4,00,000          Value of ₹9,00,000          Value of ₹15,00,000

1             ₹4.4 lakh              ₹9.9 lakh              ₹16.5 lakh

5             ₹6.4 lakh              ₹14.5 lakh           ₹24.1 lakh

10           ₹10.4 lakh           ₹23.4 lakh           ₹39 lakh

15           ₹16.7 lakh           ₹37.6 lakh           ₹62.6 lakh

20           ₹26.9 lakh           ₹60.5 lakh           ₹1.01 crore

See the jump? The last 5 years alone add massive value. That’s because the larger your money gets, the faster it grows — like a snowball rolling downhill.

Why Time is the Most Important Factor

There are two secrets to compounding:

1. The Rate of Return (higher returns grow faster, but involve more risk).

2. Time (the longer you leave your money untouched, the bigger it gets).

Of the two, time is the most powerful. Even a modest return rate, given enough time, can create wealth beyond imagination.

For example:

• At 10% growth in 10 years, ₹15 lakh becomes only ₹39 lakh.

• But in 20 years, it becomes over ₹1 crore.

That’s more than double the wealth in just 10 more years, thanks to compounding.

Why Lump Sum Investments Work Well

Most people prefer monthly SIPs (Systematic Investment Plans), which are excellent for discipline and consistency. But lump sum investments have their own advantages:

1.Immediate Compounding: Since you put in a big amount upfront, compounding starts on the whole amount from Day 1.

2.Simplicity: No need to track monthly installments — just invest once and forget.

3.Windfall Gains: Great option if you receive a bonus, inheritance, or property sale money.

Of course, lump sum investing requires you to have that much capital ready, which isn’t always possible.

But What About Inflation?

Now, here’s the reality check: while your investment grows, so does the cost of living. ₹1 crore today won’t have the same purchasing power 20 years from now.

If inflation averages 6% per year, your money’s value halves roughly every 12 years.

So while ₹1 crore sounds like a lot today, in 20 years it may feel closer to ₹30-40 lakh in today’s terms.

That’s why financial planners suggest investing more or choosing higher-return assets like equity mutual funds for the long haul.

Practical Tips for Making the Most of Compounding

1. Start Early: The earlier you start, the bigger your wealth will grow. Even small investments made in your 20s can beat larger investments made later.

2. Stay Patient: Don’t withdraw midway. Breaking compounding is like chopping a tree before it bears fruit.

3. Reinvest Earnings: Always reinvest dividends, bonuses, or interest to maximize growth.

4. Diversify: Don’t put all your money into one asset. Mix equity, debt, and safe options like PPF or FDs.

5. Review Periodically: Ensure your money is beating inflation; adjust investments if needed.

The Takeaway

So, how much can one-time investments grow in 20 years at 10%?

•              ₹4,00,000 → ₹26.9 lakh

•              ₹9,00,000 → ₹60.5 lakh

•              ₹15,00,000 → ₹1.01 crore

This is the power of compounding — quiet, steady, and unstoppable.

The lesson? Don’t underestimate the power of starting early, staying invested, and letting time do the heavy lifting. Even if you can’t invest big amounts today, small beginnings, if left to grow, can create life-changing wealth.

Remember the words often attributed to Albert Einstein: “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”

So, the best time to start planting your financial tree was yesterday. The second-best time is today. 🌱💰 

16 Financial Transactions That Can Put You on the Tax Department’s Radar

16 Transactions the Tax Department Tracks Through SFT – Report Them to Stay Safe

 Every year, banks and financial institutions have to share details of certain financial transactions with the Income Tax Department. This report is called the Specified Financial Transaction (SFT) return.

 

The SFT is linked to your PAN, which means the tax department can match your financial activity with the income you declare in your ITR. If there’s a mismatch, you may get a notice and even face penalties or prosecution.

 

Example:

 

If you declare an annual income of ₹2 lakh but buy gold worth ₹14 lakh, the tax department will want to know where the money came from.

 

A person who forgot to mention ₹25,000 interest income in his ITR was caught because banks reported it under SFT.

 

A businessman who sold land but didn’t show the capital gains in his ITR was caught through SFT data, and faced penalty plus prosecution.

 

How SFT Helps Track Transactions

 

Banks, mutual funds, registrars, and other financial entities report your high-value transactions to the IT department.

 

This data gets automatically filled into your Annual Information Statement (AIS), which you can view before filing your ITR.

 

By checking your AIS, you can ensure that your ITR matches what the tax department already knows about your finances — avoiding mistakes, delays, or penalties.

 

Key Takeaway

 

Always cross-check your AIS while filing ITR. If you miss reporting income or a transaction, chances are the tax department already knows through SFT. Reporting it correctly keeps you safe from scrutiny and legal trouble.

16 Transactions That the Tax Department Tracks via SFT

 

Every time you do a high-value transaction, your bank, mutual fund, or other financial institution is required to report it to the Income Tax Department through Specified Financial Transactions (SFT). These details are automatically reflected in your Annual Information Statement (AIS).

 

Here’s the list of transactions you should be careful about:

 

Buying bank drafts, pay orders, or banker’s cheques with cash – if you spend ₹10 lakh or more in a year.

 

Buying RBI prepaid instruments (like prepaid cards or wallets) with cash – if the total is ₹10 lakh or more in a year.

 

Cash deposits into current accounts – if deposits across all your current accounts add up to ₹50 lakh or more in a year.

 

Cash withdrawals from current accounts – if total withdrawals are ₹50 lakh or more in a year.

 

Cash deposits into savings accounts or other accounts (except current account or FDs) – if deposits are ₹10 lakh or more in a year (reported by banks, co-op banks, or post offices).

 

Cash received for sale of goods or services – if over ₹2 lakh in a year (applies to businesses covered under tax audit).

 

Cash payment towards credit cards – if ₹1 lakh or more in a year.

 

Non-cash payment towards credit cards – if ₹10 lakh or more in a year (via cheque, transfer, etc.).

 

Fixed deposits (time deposits) – if you put ₹10 lakh or more in a year (excluding renewals). Reported by banks, post office, NBFCs, and Nidhi companies.

 

Buying bonds or debentures – if you invest ₹10 lakh or more in a year.

 

Buying company shares (including share application money) – if ₹10 lakh or more in a year.

 

Company buyback of its own shares – if ₹10 lakh or more in a year.

 

Investing in mutual fund schemes – if ₹10 lakh or more in a year (excluding switching between schemes).

 

Buying or selling property – if the transaction value is ₹30 lakh or more (as per actual value or stamp duty valuation).

 

Buying foreign currency (or loading forex cards, traveller’s cheques, drafts, etc.) – if transactions add up to ₹10 lakh or more in a year.

 

Spending abroad in foreign currency (using debit/credit card, traveler’s cheques, etc.) – if expenses add up to ₹10 lakh or more in a year.

 

Key takeaway: If you cross these thresholds, the tax department already knows. Always match your ITR with your AIS to avoid notices, penalties, or even prosecution.

What Happens If You Don’t Report Income Shown in SFT and AIS?

 

The Specified Financial Transactions (SFT) data reported by banks, mutual funds, property registrars, and other entities gets auto-filled into your Annual Information Statement (AIS). The Income Tax Department cross-checks this with the income you declare in your ITR.

 

If there’s a mismatch, or if you fail to report these incomes, here’s what could happen:

 

1. You May Get a Tax Notice

 

If high-value transactions appear in your AIS but are missing in your ITR, the department can send you a notice. You may be asked to explain the source of funds or file a revised return (ITR-U) if you missed reporting.

 

2. Your Case May Go Into Scrutiny

 

If your ITR doesn’t match the SFT data, or if you haven’t filed an ITR at all, or if your reply to a notice is unsatisfactory, the tax authorities may select your case for detailed scrutiny.

 

3. Penalty for Misreporting Income

 

If the authorities find that you’ve under-reported or misreported income, they can raise additional tax demands with interest. On top of that, they can impose a penalty ranging from 50% to 200% of the extra tax payable.

 

4. Possible Prosecution (Jail Term)

 

In serious cases of willful tax evasion, prosecution can be launched:

 

If tax evaded exceeds ₹25 lakh → Rigorous imprisonment of 6 months to 7 years, plus fine.

 

Other cases of concealment/misreporting → Jail for 3 months to 2 years, plus fine.

 

5. Relief in Some Cases

 

Not all cases go straight to prosecution. Taxpayers may get relief under compounding provisions — subject to conditions and approval from the tax authority. This means penalties may be settled without jail, but only if the department allows it.

 

 Bottom line: The tax department already has your data through SFT. Always cross-check your AIS before filing your ITR and ensure full disclosure. Missing or mismatching information can not only cost you extra tax and penalties but in extreme cases, even land you in jail.

New GST Reforms Promise Clarity on Taxes and Cheaper Cars

 “New GST Overhaul to Simplify Taxes and Cut Disputes; Automobiles Likely to Get Relief”

 GST Revamp to Simplify Taxes, Automobiles and Essentials to Benefit

 

New Delhi: Businesses may finally get relief from confusing courtroom battles over GST rates on everyday products — like the famous disputes over whether parathas or popcorn should be taxed differently. The government’s plan to move to a simpler two-rate GST system aims to end such bizarre disputes.

 

The revamp will also bring cheer to the automobile sector. Small cars are likely to move from the current 28% tax slab to 18%, while bigger cars may shift to a new 40% slab. But even for higher-end models, the overall tax burden will fall once the extra compensation cess of 17–22% on automobiles is phased out.

 

The GST Council’s Group of Ministers on tax rate rationalisation, headed by Bihar Deputy Chief Minister Samrat Chaudhary, will meet in New Delhi this Wednesday and Thursday to examine the Centre’s proposal. Officials said the agenda is “exhaustive,” with a focus on streamlining the entire GST framework.

 

Under the new structure, there will be two main rates: one for essential items and another standard rate for everything else. All food items — whether packaged or loose — will likely fall into the 5% category, officials said. The guiding principle will be simple: if a product is essential, it will either be exempt or taxed at 5%; non-essentials will fall under the standard rate.

 

Currently, packaged food is taxed at 12%, while unpackaged food is at 5% — a difference that has led to confusion for both businesses and consumers. Attempts to clarify this under the existing system have only made things more complicated.

GST Relief to Boost Spending and End Bizarre Tax Disputes

 

In the past, GST rules have often baffled both businesses and consumers. Last year, the GST Council clarified that popcorn would be taxed at 5% if sold loose, 12% if packaged and labelled, and 18% if caramelised — sparking widespread criticism.

 

Similarly, in 2020, the Karnataka tax authority ruled that packaged parathas — which require heating before eating — should be taxed at 18%, unlike rotis which attract 5% GST. Though this order was later annulled on technical grounds, the actual rate question remained unresolved.

 

Even papads stirred controversy. Social media once claimed that only round papads were tax-free while square ones were not. The CBIC later clarified that all papads are exempt from GST, regardless of shape or name, except when served in restaurants, where normal restaurant food tax applies.

 

A Fresh Start With GST Revamp

 

Officials say such confusing disputes will finally end with the proposed GST restructuring. The new system, which reduces the current four slabs (5%, 12%, 18%, 28%) into a simpler two-rate structure, will eliminate much of the ambiguity.

 

“The proposed GST overhaul is a positive step. It will end classification-related disputes and give a strong push to consumer demand at a time when exports are facing global challenges,” said M. S. Mani, Partner, Indirect Taxes at Deloitte India.

 

Why Businesses Are Hopeful

 

Experts point out that disputes arise because companies naturally want their products placed in lower tax slabs, while tax officers often push for higher ones. This tug-of-war has affected items like auto parts, cosmetics vs. medicated products, and flavoured milk. With only two slabs, the scope for such arguments will sharply reduce.

 

Karthik Mani, Partner – Indirect Tax at BDO India, added: “A two-rate structure will reduce disputes significantly. While it may create some cases of inverted tax structure, the government has already said correcting this imbalance is part of the reform plan.”

 

 Bottom line: The GST revamp isn’t just about cheaper goods — it’s about ending years of confusion, restoring business confidence, and giving a timely boost to consumer spending.Relief to automobiles

 

Fewer GST Slabs to Ease Automobile Taxes

 

As part of the proposed GST revamp, high-end cars — which currently face 28% GST plus an additional cess of 17–22% — will move to a single 40% GST slab without cess. According to officials familiar with the discussions, this will actually lower the overall tax burden on these vehicles.

 

This category includes:

 

Cars with 1200–1500 cc engines, up to 4 metres in length (currently 17% cess)

 

Cars with 1200–1500 cc engines, above 4 metres (20% cess)

 

SUVs with 1500 cc+ engines, above 4 metres (22% cess)

 

At present, the total tax on these ranges from 45% to 50%. Under the new system, it will be streamlined to 40% flat. Experts note that while sales volumes in this segment aren’t very high, the clarity and lower burden will benefit both buyers and manufacturers.

 

On the other hand, small cars are set to get even bigger relief. Vehicles currently in the 28% slab but with a small cess of just 1–3% — such as:

 

Petrol, CNG, and LPG cars with engines up to 1200 cc and under 4 metres (1% cess)

 

Diesel cars up to 1500 cc and under 4 metres (3% cess)

 

These vehicles currently face a tax burden of 29–31%, but will likely shift down to the 18% GST slab. Analysts say this will make small cars significantly cheaper, giving a much-needed push to automobile sales, which have only grown by 2.79% this fiscal year.

 

 In short: Bigger cars will get simplified taxes and slightly lower rates, while smaller cars could see major relief, making them more affordable for middle-class buyers.

GST Overhaul: 40+ Stocks That Could Gain Big From Rate Cuts

 GST Revamp: Over 40 Stocks Poised to Benefit, Say Experts – Check the Full List

 

Prime Minister Narendra Modi’s Independence Day announcement that India will overhaul GST by Diwali has set Dalal Street buzzing. Analysts are calling it the biggest indirect tax reform since GST was first rolled out in 2017.

 

The government plans to simplify the current four-tier GST system into just two key rates – 5% and 18% (excluding sin goods). This means:

 

Almost all items taxed at 12% will move down to 5%.

 

A large share of goods currently at 28% will shift to 18%.

 

Brokerages estimate this could cut retail prices by 4–5%, giving households relief and driving higher consumption. The Finance Ministry expects a revenue impact of about ₹50,000 crore, which it considers manageable.

 

Sectors and Stocks in Focus

 

Automobiles: Two-wheelers, small cars, and commercial vehicles could see a major boost as GST on them drops from 28% to 18%. Winners include Bajaj Auto, Hero MotoCorp, TVS Motor, and Eicher Motors.

 

Cement: A cut from 28% to 18% could lower prices by nearly 8%. Analysts expect a ₹20,000–25,000 crore revenue hit for the government, but a big sentiment lift for the sector.

 

Consumer Durables: Products like air conditioners and large appliances will get cheaper, giving companies like Voltas, Blue Star, Havells, and Dixon Technologies a boost.

 

Banks & Financials: With lower taxes encouraging spending, credit demand may rise. ICICI Bank, HDFC Bank, and IDFC First Bank are expected to benefit.

 

Brokerages like Motilal Oswal, Jefferies, and Emkay Global believe these changes could also help bring down inflation by 0.5–0.6 percentage points annually, provided the government manages the revenue gap well.

 

The Big Picture

 

GST Rate Cuts: Over 40 Company Stocks Set to Gain

Prime Minister Narendra Modi’s Independence Day announcement on a new GST structure has given the stock market a big push. Investors are excited because this could be the biggest tax reform since GST began in 2017.

The plan is to replace the complicated four-slab GST system with just two main rates – 5% and 18% (except for sin goods like liquor and tobacco). This means many everyday items and big-ticket products will get cheaper:

• Goods currently taxed at 12% will mostly drop to 5%.

• Most products in the 28% slab will come down to 18%.

For families, this could mean 4–5% lower prices on several things they buy. For companies, it means more people spending, which is great for business.

Who Stands to Benefit?

• Automobiles – Two-wheelers, small cars, and trucks may get cheaper. Big winners: Bajaj Auto, Hero MotoCorp, TVS Motor, Eicher Motors.

• Cement – Prices may fall by around 8%, which is a huge positive for the sector.

• Consumer Durables – Products like air conditioners, big TVs, and appliances could see lower taxes, helping companies such as Voltas, Blue Star, Havells, and Dixon Technologies.

• Banks – With people spending more, loan and credit demand may rise. Likely gainers: ICICI Bank, HDFC Bank, IDFC First Bank.

Experts also believe cheaper goods could help reduce inflation slightly (by about 0.5%).

The Bottom Line

More than 40 listed companies across different sectors are expected to benefit once the new GST slabs are rolled out. The final approval is expected by the GST Council around the third quarter of FY26.

 

Cars, ACs, and TVs to Get Cheaper: Full List of Items Under New GST Cuts

"Cars, ACs, and TVs May Soon Cost Less: Here’s the Full List of Items That Could Get Cheaper with New GST Cuts"

For India’s middle class, where even a small shift in tax rates can make a big difference to household budgets, Prime Minister Narendra Modi’s latest announcement comes as good news. The government is planning to simplify the Goods and Services Tax (GST) system by reducing the current four tax slabs of 5%, 12%, 18%, and 28% into just two — 5% and 18%. A separate higher tax will still apply to luxury and harmful products like tobacco.

 

For everyday consumers, this move could mean real savings. Prices of essential goods and big purchases alike are expected to drop. Items such as clothes and textiles, farm equipment, auto parts, healthcare services, insurance products, and even daily-use items in FMCG and retail could all become more affordable.

This isn’t just a small tax adjustment — it’s a major reset that could boost demand, improve household confidence, and give a push to consumption-driven growth.

 

On Wednesday, Finance Minister Nirmala Sitharaman is set to address a key meeting of the Group of Ministers (GoM) from various states, where she will make a strong case for the sweeping GST reforms.

 

“The aim is to present the Centre’s perspective on the reform plan. Even though the Union Finance Minister is not formally part of the GoM, her presence and remarks will help members better understand the Centre’s thinking and vision behind the proposal,” a government source told The Times of India. List

What Could Get Cheaper Under the New GST Regime?

If the proposed GST reforms go through, households can expect relief on several essentials as well as big-ticket purchases. Here’s a look at the key items:

•              Small Cars: Tax rate cut from 28% to 18%

•              Insurance Premiums: Down from 18% to 5% or even zero

•              Daily-use Essentials: From 5% to zero

•              Air Conditioners: From 28% to 18%

•              Televisions: From 28% to 18%

Everyday Items Likely to Shift to the 5% Slab (as per ANI)

•              Tooth powder

•              Bhujia, namkeen, potato chips

•              Ketchup, jam, mayonnaise

•              Packaged juices

•              Pasta, noodles

•              Butter, condensed milk, ghee, cheese

•              Milk-based beverages

Why This Matters

Lower GST rates don’t just mean cheaper prices for consumers. They could set off a chain reaction — reducing logistics costs, simplifying compliance for businesses, and lifting demand for goods that are highly price-sensitive. More demand could, in turn, create jobs.

And at a time when global trade is facing uncertainty due to Trump’s new tariff hikes, India’s move could also make its exports more competitive in international markets.

 

“What are the smart ways stock market traders can lower the tax they pay on profits when filing their income tax return under the new rules?”

What are the smart ways stock market traders can lower the tax they pay on profits when filing their income tax return under the new rules

Stock market traders and investors can significantly reduce their capital gains tax by taking advantage of the set-off and loss carry-forward concept, even under the new tax regime. However, to utilize this concept, you must first understand what type of stock market income is eligible for it. Stock market trading can include equity intraday trading, delivery-based trading of equity shares, and even speculative and non-speculative futures and options (F&O) trading.

How many years can you carry forward and adjust the losses?

The rules for speculative and non-speculative stock market income are different. For non-speculative F&O income, losses can be carried forward for up to eight assessment years. For speculative intraday trading, losses can be carried forward for up to four assessment years.

Explains:

•Under the new tax regime of Section 115BAC of the Income Tax Act, 1961, the adjustment and carry forward of losses arising from stock market trading are allowed, depending on the nature of the trading activity.

•Where business activities are considered non-speculative, such as delivery-based trading carried out during the course of business, the losses incurred can be set off against any major income, including capital gains and income from other businesses (but not against salary income).

•If there is an absorbed loss, it can be carried forward for a maximum of 8 assessment years, provided the income details are filed within the stipulated time and where applicable, the tax audit requirements are met.

•On the other hand, income based on speculation, such as that generated from intraday stock trading, is considered income from speculative business. Losses from speculative business can only be set off against other speculative income in the same year.

        

They cannot be adjusted against other income sources. However, such gambling losses can be carried forward for 4 assessment years and can only be adjusted against gambling income in those years, subject to the condition of timely filing of return.

Long-term capital losses cannot be adjusted against long-term capital gains.

Explains:

• Where the income from stock market trading in securities falls under "Capital Gains", the set-off and carry-forward treatment will follow the rules of capital gains. Accordingly, Short-Term Capital Loss (STCL) can be set off against both short-term and long-term capital gains, while Long-Term Capital Loss (LTCL) is only permitted to be set off against long-term capital gains. Both categories of capital loss can be carried forward for a maximum of 8 assessment years.

The new tax bill 2025 presents a one-time relief scheme that is for short-term and long-term capital loss.

The Income Tax Bill, 2025 has introduced a temporary one-time relief. It allows taxpayers to adjust accumulated short-term and long-term capital losses against any type of capital gains (short-term or long-term) under the new system as of March 31, 2026.

This set-off will be allowed for the 8 assessment years starting from the financial year 2026-27.

Traders and investors in the stock market can significantly reduce their capital gains tax by taking advantage of the set-off and loss carry-forward concept, even under the new tax regime.

 However, to utilize this concept, you must first understand what type of stock market income qualifies for it. Stock market trading can include equity intraday trading, delivery-based trading of equity shares, and even speculative and non-speculative futures and options (F&O) trading.

Check the rules of different types of stock market trading below.

 Share market traders can save taxes by using set-off and carry-forward rules. Intra-head set-off means that you can set off within the same income category, such as losses from capital gains can only be set off against capital gains and not against any other income. How many years can you carry forward and set off losses? The rules are different for speculative and non-speculative share market income. For non-speculative F&O income, losses can be carried forward for eight assessment years. For speculative intraday trading, losses can be carried forward for four assessment years.

Explains:

 •Under the new tax regime of Section 115BAC of the Income Tax Act, 1961, adjustment and carry forward of losses from stock market trading is permitted, depending on the nature of the trading activity.

•Where business activities are considered non-speculative, such as delivery-based trading carried out during the course of business, the losses incurred can be set off against any major income, including capital gains and income from other businesses (but not against salary income).

•If there is an absorbed loss, it can be carried forward for 8 assessment years, provided that the income return is filed within the stipulated time and the tax audit requirements, where applicable, are properly adhered to.

•On the other hand, income based on speculation, such as that arising from intraday stock trading, is considered income from speculative business. Losses from speculative business can only be set off against other speculative incomes in the same year.

They cannot be adjusted against other income sources. However, such estimated losses can be carried forward for 4 assessment years and can only be adjusted against estimated income in those years if the return is filed on time.

Long-term capital losses cannot be adjusted against long-term capital gains.

 Explains:            

•Where the income from stock market transactions is included in 'capital gains', the set-off and carry-forward treatment will adhere to the rules of capital gains. Accordingly, short-term capital losses (STCL) can be set off against both short-term and long-term capital gains, while long-term capital losses (LTCL) are restricted to being set off only against long-term capital gains. 

Capital losses from both categories can be carried forward for a maximum of 8 assessment years. The new tax bill 2025 introduces a one-time relief measure for short-term and long-term capital losses. The Income Tax Bill, 2025 allows for a transitional one-time relief.

 It permits taxpayers to set off accumulated short-term and long-term capital losses as of March 31, 2026, against any type of capital gains (short-term or long-term) under the new regime. Surana states: “This set-off will be allowed for 8 assessment years starting from 2026-27.”

Big Relief on GST: Govt to Cut Down Multiple Tax Rates to Just Two Slabs

Good News on GST! Govt Plans Just Two Tax Slabs Instead of 5-28% Rates      Finance Ministry Reveals Key Details

Big GST Relief Coming Soon!

In his Independence Day speech, Prime Minister Narendra Modi gave a big Diwali gift to the common man.                                         the burden of Goods and Services Tax (GST) is likely to come down with the next phase of reforms.

PM Modi highlighted that the upcoming GST changes are designed to help ordinary citizens, farmers, the middle class, and small and medium businesses (MSMEs).

According to details shared by the Finance Ministry, the government is considering moving to a two-slab GST system – one standard rate and one lower "merit" rate – along with a few special rates for select items. This will replace the current complicated structure of 5%, 12%, 18% and 28% slabs. The final decision is expected in the next GST Council meeting.

On the 79th Independence Day, PM Modi also underlined how GST, introduced in 2017, has been a game-changing reform for the country’s economy.

Key Points on the Upcoming GST Reforms

1.Structural reforms – Making GST simpler and stronger.

2.Rate rationalization – Fewer tax slabs, easier compliance.

Ease of Living – Relief for Consumers and Businesses

The government has already shared its GST reform proposals with the Group of Ministers (GoM) under the GST Council for review. The core idea behind these next-generation GST reforms is to adjust tax rates in a way that benefits everyone – especially the common man, women, students, farmers, and the middle class.

The reforms also aim to end long-standing issues like classification disputes, inverted duty structures, and unstable tax rates. By doing so, the government hopes to make GST simpler, fairer, and more predictable. The bigger picture: a stronger economy, more sectoral growth, and a friendlier environment for doing business.

Key Pillars of the Proposed GST Reforms

1. Structural Reforms https://sktaxlive.blogspot.com/?m=1

• Fixing inverted duty structures (when input tax is higher than output tax) so businesses don’t suffer from credit accumulation and can focus on domestic value addition.

• Streamlining classification rules to reduce disputes, simplify compliance, and create fairness across industries.

• Giving long-term clarity on GST rates and policies to build industry confidence and help businesses plan better.

2. Rate Rationalization

• Lowering taxes on essential and aspirational goods to improve affordability and boost consumption.

• Simplifying the tax structure by moving to just two slabs – standard and merit – with a few special rates for select items.

• Using the fiscal space created by the end of the compensation cess to realign tax rates for long-term sustainability of GST.

These reforms are designed not just as a tax adjustment, but as a roadmap for India’s economic growth, where GST becomes easier to understand, fairer for businesses, and lighter on the common man’s pocket.

3. Ease of Living https://sktaxlive.blogspot.com/?m=1

The government also wants GST to be simpler and hassle-free, especially for small businesses and startups. The focus is on using technology to save time and reduce paperwork.

Key measures being considered include:

• Easy registration: Faster, tech-driven registration processes, designed to be seamless for entrepreneurs and small firms.

• Pre-filled returns: Minimizing manual work and reducing chances of mismatches or errors.

• Quicker refunds: Automated and time-bound refund processing, especially for exporters and businesses facing inverted duty structures. https://sktaxlive.blogspot.com/?m=1

The Centre has shared these reform ideas, built on the three key pillars (structural reforms, rate rationalization, and ease of living), with the Group of Ministers (GoM) for further discussion.

The GST Council will take up the GoM’s recommendations in its upcoming meeting. The government is keen to push for early implementation, so that citizens and businesses can start experiencing the benefits within this financial year itself, according to the Ministry of Finance.