Taxpayers filing ITR 2026 can claim rebate under Section 87A to reduce their tax liability, with different limits depending on the tax regime chosen. Under the old regime, a rebate of ₹12,500 is allowed for income up to ₹5 lakhs, while the new tax regime allows rebate of ₹60,000 for income up to ₹12 lakhs. According to Clear Tax, rebate can be applied to the total tax before adding a health and education cess of 4%. The Income-Tax Department allows taxpayers to claim rebate in the updated ITR forms - ITR-2 and ITR-3. For individuals whose income exceeds the ₹12 lakh limit with a slight gap, and where the tax exceeds the income over the cap, the tax is limited to income exceeding ₹12 lakh.
Debt funds face significant tax changes under the new framework, with investments made on or after April 1, 2023, now taxed as short-term capital gains at individual income tax slab rates regardless of holding period. As reported by Mint, this eliminates the long-term tax benefit that previously applied to these investments. However, debt fund units bought before April 1, 2023, still retain a 12.5% tax rate on long-term capital gains if held for over two years. This split treatment based on purchase date creates complexity and may lead to reduced money flowing into debt fund categories, potentially slowing asset growth.
Equity gains from stock market investments continue to offer tax advantages under the Capital Gains Tax (CGT) framework. According to reports from Mint, long-term capital gains on stocks are tax-free up to ₹1.25 lakh each year for investments held over one year, providing significant tax breaks for retail investors. For gains above this threshold or for short-term stock gains, the tax rate is 20%. This differential tax structure encourages long-term investment approaches in equity markets.
Fixed deposits continue to follow traditional taxation methods, with interest earned from FDs taxed at the investor's individual income tax rate, meaning the actual return after tax depends on their income level. As reported by Mint, this approach maintains the traditional taxation method for fixed-income investments. The government's changes to debt fund taxes have narrowed the tax advantage that previously existed for debt funds, requiring investors to consider all investments based on actual post-tax returns.
Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) have significantly outperformed traditional investments over the past six years, with the Nifty REIT-InvIT index delivering an annualised return of 12% between July 2019 and March 2026, compared to 11.1% for the Nifty 50, 7.5% for debt funds, and 6.5% from fixed deposits. According to The Economic Times, these alternative assets have attracted investors due to their low correlation with other asset classes and tax efficiency. The total market cap of REITs and InvITs stands at $47 billion, with investor base expanding to nearly 8 lakh in 2026 from about 19,000 in 2019. Under the revised tax framework, capital gains on REIT and InvIT units are treated on a par with equity investments at 12.5% if held for more than a year and 20% if held for less than a year.
