The Silent Drain on Your Market Returns - The Triple Tax Trap

Hey fellow investor,

If you've been riding the waves of India’s stock market lately, you might’ve noticed something quietly cutting into your returns - TAXES. 

We’re talking about STT, LTCG, and STCG (The triple tax trap - Just like triple talaq, the Triple Tax -  LTCG, STCG, and STT can end your market romance in three quick hits, leaving your wallet crying.)  The trio that trims your profits every step of the way.

And here’s the eye-opener: In 2025 alone, the government collected ₹78,000 crore from market-related taxes. Compare that to just ₹1,000-1,200 crore in 2004, and it’s clear the burden has grown massively.

So now we have to ask, is this level of taxation helping or hurting our market growth?

Breaking Down the Market Tax Load

Lets simplify the core taxes that investors face:

STT – Just like a Toll tax on Every Trade -  This is the fee you pay on every stock market transaction-buying or selling. Introduced in 2004, it's like a toll booth for trading. In FY 2024-25, STT collections are estimated at a whopping 50,000 crore, a 55.56% jump from the previous year, thanks to soaring trading volumes and rate hikes (like the 0.15% on options trading in Budget 2024).

Capital Gains Tax (CGT): When you sell a stock for a profit, the government wants a slice. Short-Term Capital Gains (STCG)-for stocks held less than a year-are taxed at 20%, while Long-Term Capital Gains (LTCG)-for holdings over a year-are taxed at 12.5% (with an exemption up to 1.25 lakh). In 2025, CGT is raking in about  20,000 crore.

Stamp Duty: This smaller but pesky tax on share transactions adds another 8,000 crore to the government's kitty.

Why These Taxes Were Introduced 

STT: Introduced to simplify taxation and curb tax evasion, STT was meant to be a straightforward way to tax transactions without relying solely on capital gains declarations. It's also a steady revenue stream, as it's charged whether you make a profit or not.

LTCG and STCG: These taxes ensure that wealth generated from market gains contributes to public coffers, funding infrastructure, healthcare, and more. The 2018 reintroduction of LTCG (after a 2004-2018 hiatus) was pitched as a way to tax the wealthy fairly.

Stamp Duty: A legacy tax, it's a small but consistent revenue source tied to the legal transfer of securities.

The stock market isn't just a playground for the rich- it's a wealth-building tool for millions of middle-class Indians, from young professionals to retirees. With 78,000 crore in taxes, the burden feels heavy, especially when you're already grappling with market volatility, brokerage fees, and inflation. High taxes can discourage trading, reduce market liquidity, and make India's markets less attractive compared to global peers. So, let's make the case for why it's time to dial back LTCG, STCG, and STT.

Why It's Time to Rethink and Realign

1. Make Investing Attractive for Everyone

The growth of India’s retail investor base is a success story. But steep taxes discourage participation. Let’s make it easier to stay invested:

• Reduce STCG to 15%

• Bring LTCG back to 10%

Lower taxes mean higher retention, more trades, and broader market engagement.

2. Reward Patience, Not Punish It

Long-term investors help create market stability. Yet taxing them at 12.5% feels like punishing discipline. Rolling back LTCG to 10% or increasing the exemption to ₹2 lakh could encourage more people to hold their investments longer creating deeper, healthier markets.

3. STT Needs a Reality Check

STT doesn’t care if you win or lose—it applies to every trade. And in 2025, that’s a ₹50,000 crore haul.Reducing STT to 0.05% for delivery and 0.1% for derivatives could lower costs, boost trading activity, and reduce the shift toward offshore or unregulated platforms.

4. Compete Globally with Smarter Tax Policies

Global markets like Singapore and Hong Kong don’t levy capital gains tax. The U.S. has a more flexible structure based on income. To truly make India a global financial powerhouse, we must make our tax policies investor-friendly both for domestic and foreign investors.

5. Lower Taxes Might Actually Boost Revenue

The Laffer Curve shows that too much tax can shrink the base and reduce revenue. We might already be close to that point. Reducing taxes could spark more trades and transactions off setting any dip in rates with increased volume.

A Request to Policymakers - 

To 

The Finance Ministry

You’ve built a solid market framework. But now is the time to ensure that framework supports long-term investing, healthy risk-taking, and inclusive growth.

• STCG at 15%

• LTCG back to 10%

• STT slashed by half

These changes can fuel even more market growth, boost participation, and make India a competitive, thriving investment destination.

Final Word

Indian investors are committed. They’re learning, adapting, and contributing. But when taxes eat into hard-earned gains, it can feel discouraging.

If we want to see a future where more Indians build wealth through equities, our tax system needs to evolve.

What’s your take? Are these taxes holding you back too? Let’s talk about it—because change starts with awareness, and then with action.