Same fund. Same twelve percent. One of them used the allowance.
Two people put Rs 10 lakh into the same index fund at 12 percent for twenty years. It becomes Rs 9646293 for both. The only difference is when they book the gains.
| Same money . same fund . same 20 years | Tax bill | Kept in hand |
|---|
| Never sells . one exit at year 20 | 1065162 | 8581131 |
| Books a small gain each year . rebuys | 768287 | 8878006 |
The allowance is Rs 125000 of long term gains a year, tax free. Over twenty years that is Rs 2500000 of room. The buy and hold investor uses one year of it and lets nineteen quietly expire. Book the gains a little at a time instead, then buy the same units back, and the same money keeps Rs 296875 more. No extra risk. No stock picking. Just an allowance that was already yours.