Equities enjoy favoritism when it comes to treating them for long term capital gains tax. If you hold shares for over one year and sell the same at a profit, you do not end-up paying capital taxes.

There are talks that this year the government may change the tenure for treating capital gains tax from one year to maybe three years for equity shares. What this means is that if you hold shares for even up to three years and make profit on the same, you would end-up paying taxes.

Less than one year holding

If you sell shares at a profit, holding them for less then one year, then you pay a short term capital gains tax of 15 per cent.

Now there are two things that could happen as far as long term capital gains is concerned in the Union Budget 2017-18. The first is that either the year limit be enhanced or there be a taxed imposed on sale of shares. Equity markets are actually in a stage where they can bear this shock. There will be two things that happen if this is implemented. First is that it will align all other instruments with equities and second it will encourage individuals to hold onto equities for the long term.

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