Budget 2026: From savers to investors – Unlocking India’s physical wealth through budget reforms

By Navneet MunotIndia is a country of enormous diversity, with languages, customs and beliefs varying widely across regions. Yet one financial habit cuts across income levels and geography. Most households have grown up buying physical gold or silver every year on Akshaya Tritiya, Dhanteras or on other auspicious days. This was not driven by price charts or return calculations but because Gold was trusted as a store of value that could be passed down across generations. For many families, Land served a similar purpose as a tangible, secure asset. In the absence of a wide range of formal investment avenues, this instinct served Indian households well and helped India build a reputation as a ‘Nation of Savers’. The downside however was that a large share of this wealth remained idle. That is now beginning to change owing to sustained efforts of policymakers and industry to build confidence in India’s capital markets. As of FY25, Indian households had ~7% of their total assets in Equities vs only ~3% in FY15. Since January 2021, Domestic Institutional Investors (DIIs) have infused over $250 billion into equity markets, providing stability even as Foreign Portfolio Investors (FPIs) pulled out approximately ~$20 billion during the same period. Retail participation through mutual fund SIPs has been critical, with monthly SIPs rising to ~Rs 29k Cr in November 2025 from ~Rs 8k Cr in November 2019. Even so, financialization of savings has barely begun, with households still holding approx. two third of wealth in physical assets.A section 54F style Income Tax provision for physical asset monetisationToday, with numerous avenues available to invest savings more productively and with the economy in need of enormous financial capital to meet its growth objectives, the next phase of reforms must focus on monetising these assets in a productive way. The Union Budget could consider introducing a new provision in the Income Tax Act, modelled on Section 54F. If introduced, it should provide an exemption from long-term capital gains tax when proceeds from the sale of physical gold, silver or Land are reinvested into Equity Linked Savings Schemes (ELSS), with a lock-in of 5 years. Section 54F currently allows tax-free reinvestment of gains from any asset into a residential house. Extending a similar principle to financial assets would encourage households to rebalance a part of their portfolios in a tax-efficient manner.Why this reform matters now?Indian households are among the largest holders of precious metals in the world, with an estimated holding of ~25,000 tonnes of gold accumulated over generations. The recent surge in gold and silver prices has significantly increased the financial worth of families across India. At the same time, for a large number of households, this wealth remains largely notional.Secondly, most working Indians remain outside formal pension systems, even as life expectancy rises and healthcare costs increase. As ELSS’ provide transparency, professional management and potential inflation-beating returns in the long term, this reform could go a long-way in creating a credible retirement security. Far-reaching impact across economyFor households, the benefits could be tangible if the reform is introduced. Families that have seen the value of inherited gold or under-utilised land rise over time could monetise a portion and reinvest it into ELSS without immediate taxation. Over 10–20 years, such investments can materially strengthen retirement security or fund other financial goals. For the financial system, even a modest shift of household portfolios from physical to financial assets could translate into substantial, stable inflows. The 5-year lock-in would create a pool of patient domestic capital. Such flows help deepen market liquidity and crucially, cushion the market and the economy during bouts of FPI selling. A stronger domestic investor base is the best insurance against external volatility.From the Government’s perspective, the revenue risks appear limited. Many of these Gold and Land holdings are not being sold today and are being passed on through generations. When these get monetised, the Government can generate revenues from securities transaction tax, Stamp duty and GST on transactions/associated services that would not have occurred otherwise. Without requiring budgetary allocation, it uses the tax benefit to gently change behaviour, encouraging savers to become long-term investors. This should also aid Government’s efforts for formalisation of the economy. Every festive season, India’s cultural affinity for gold expresses itself in strong demand. This festive season, robust festival-driven purchases contributed to higher gold imports ($9.6Bn in Oct’25, $14.7Bn in Nov’25 vs Average of $3.3Bn for other months of CY25) adding to the current account deficit at a time when trade landscape is challenging. At the macro level, recycling household gold can gradually reduce dependence on incremental imports and ease current account pressure. More importantly, it would free up much needed financial capital needed to finance India’s growth ambitions. A Budget reform that could signal a maturing economyUnion Budgets are often considered a statement of Government’s intent. A section 54F-style exemption for reinvestment of proceeds from physical assets into financial products like MFs would signal confidence in India’s capital markets to the rest of the world. With emphasis on investor protection and investor education, such a measure can advance financial inclusion, macroeconomic resilience and the realisation of Viksit Bharat in the decade ahead. (Navneet Munot is MD & CEO of HDFC Asset Management Company)