Union Budget 2027-28 discussions intensified after Finance Minister Nirmala Sitharaman’s latest comments spotlighted long-term capital gains (LTCG) taxation, prompting investors and market analysts to advocate for reforms in equity taxation, securities transaction tax (STT), and cross-asset capital gains policies.
The Finance Minister has not yet announced any tax cuts or changes to the current tax system, leaving investors’ demands as proposals rather than confirmed policies.
A key request from investors is to lower the 12.5% tax on long-term capital gains from eligible equities or revert to the previous 10% rate. SBI Research suggests eliminating this tax altogether, believing it could boost long-term investments in India and strengthen domestic capital.
Under the current rules, eligible long-term gains from listed Indian equity shares and equity-oriented mutual funds are taxed at 12.5% on aggregate gains exceeding ₹1.25 lakh in a financial year, subject to applicable conditions.
Market participants have called for a reduction or removal of securities transaction tax, particularly after the increase in the levy on certain derivatives transactions in Budget 2026. Securities transaction tax and long-term capital gains tax are separate levies, with securities transaction tax applying to specified securities transactions and long-term capital gains tax charged on eligible profits when an asset is sold.
Investors seek clarity on potential changes to transaction costs and capital gains taxes. They also question the varying tax treatments for Indian equities, foreign stocks, gold, property, and debt funds.
For example, long-term gains from Indian equities up to ₹1.25 lakh annually are tax-exempt, but gains from US stocks and physical gold do not enjoy this benefit.
The government must weigh investors’ desires for higher post-tax returns against revenue needs and tax system goals. Options include adjusting rates, exemptions, holding periods, or maintaining the current structure.
Until a formal announcement is made, investors should calculate their returns using the current tax provisions rather than assume that a rollback is forthcoming. As the government weighs its options, it is likely that any changes to the tax system will be carefully considered to ensure they align with the country’s economic goals.
Market participants are awaiting the Union Budget 2027-28 to see if the government will address their concerns and make changes to the tax system. The budget is expected to be presented soon, and investors will be watching closely to see if their demands are met.