India's deep-rooted tradition of saving in physical gold and land, a habit transcending regions and income levels, is on the cusp of a historic transformation. While this instinct built the nation's reputation as a 'Nation of Savers', a colossal share of this wealth remains idle. Now, a pivotal reform proposed for the Union Budget aims to channel this dormant capital into the country's growth story by incentivising a shift towards financial markets.
The Great Indian Savings Shift: From Physical to Financial
For generations, Indian families have accumulated gold on Akshaya Tritiya and Dhanteras, and invested in land, viewing them as timeless stores of value. This cultural practice, however, has led to an asset imbalance. Indian households still hold roughly two-thirds of their wealth in physical assets. The positive change is that financialisation is accelerating. Data shows that as of FY25, Indian households had about 7% of their total assets in Equities, a significant jump from only ~3% in FY15.
The surge in domestic investment is undeniable. Since January 2021, Domestic Institutional Investors (DIIs) have pumped over $250 billion into equity markets, providing crucial stability even as Foreign Portfolio Investors (FPIs) withdrew around $20 billion. The backbone of this stability has been retail participation through Systematic Investment Plans (SIPs), with monthly contributions soaring to approximately Rs 29,000 crore in November 2025 from Rs 8,000 crore in November 2019.
A Proposed Tax Catalyst: Unlocking Gold and Land Wealth
To catalyse the next phase of this shift, a novel tax provision modelled on Section 54F of the Income Tax Act has been proposed. The idea is to offer 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 period of 5 years.
Currently, Section 54F allows tax-free reinvestment of capital gains into a residential house. Extending this principle to financial assets would encourage households to rebalance their portfolios in a tax-efficient manner. The timing is critical. Indian households sit on an estimated ~25,000 tonnes of gold, whose value has surged. For many, this wealth is notional. Simultaneously, with rising life expectancy and most working Indians outside formal pension systems, there is an urgent need for credible retirement security that long-term equity investment can provide.
Far-Reaching Benefits for Households and the Economy
The potential impact of this reform is multi-dimensional:
For Families: They could monetise a portion of inherited gold or under-utilised land and reinvest it into professionally managed ELSS without an immediate tax burden. Over 10-20 years, this could substantially bolster retirement corpus or other financial goals.
For Financial Markets: Even a modest portfolio reallocation would translate into massive, stable inflows. The 5-year lock-in would create a pool of patient domestic capital, deepening market liquidity and acting as a buffer against FPI volatility. A stronger domestic investor base is the best insurance against external shocks.
For the Government and Macro-Economy: The revenue risk is limited, as much of this gold and land isn't traded currently. Upon monetisation, the government can earn from Securities Transaction Tax, Stamp Duty, and GST on associated services. At a macro level, recycling household gold can gradually reduce dependence on imports (which spiked to $9.6Bn in Oct’25 and $14.7Bn in Nov’25), easing current account pressure and freeing up capital for national growth ambitions.
Such a budget measure would signal confidence in India's capital markets to the world. Coupled with investor education, it can advance financial inclusion, macroeconomic resilience, and accelerate the journey towards a Viksit Bharat. As argued by Navneet Munot, MD & CEO of HDFC Asset Management Company, this reform uses the tax code not for a handout, but to gently guide savers to become long-term investors, formalising the economy without a direct budgetary outlay.
