Investors seek capital gains tax relief ahead of Union Budget

As the Union Budget for 2026–27 approaches, market participants have called on the government to ease capital market taxation, with a particular focus on increasing the exemption limit for long-term capital gains (LTCG) and avoiding any further rise in transaction-related taxes.

Finance Minister Nirmala Sitharaman is due to present the Budget on 1 February, a day on which both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) will operate live trading sessions.

In their pre-Budget submissions, industry stakeholders have sought greater tax relief for retail and long-term investors. JM Financial Services has recommended raising the tax-free threshold for equity LTCG from Rs 1.25 lakh to Rs 2 lakh, arguing that this would better reflect inflation and encourage sustained participation in the markets.

The firm has also proposed standardising the definition of “long term” across asset classes, suggesting a uniform 12-month holding period for equities, debt, gold and real estate. Such a move, it said, would simplify the tax framework and reduce confusion for investors. Another key suggestion was to allow capital losses to be set off against income from other heads.

Concerns have also been raised about transaction taxes, particularly the Securities Transaction Tax (STT). Dhiraj Relli, managing director and chief executive of HDFC Securities, said stakeholders had recommended keeping STT on cash equity trades lower than that on derivatives, to incentivise long-term investment over speculative trading.

He also suggested taxing only the profit element in share buybacks and aligning dividend tax rates for domestic investors with those applicable to non-resident Indians.

Tejas Khoday, chief executive of brokerage firm FYERS, echoed calls to avoid any further increase in STT. He said lowering both long-term and short-term capital gains tax to 10 per cent could significantly boost retail investor participation in the equity markets.

Khoday also urged the government not to raise import duties on gold and silver, noting that these assets play an important role as hedges against stock market volatility and a weakening rupee.

With expectations building ahead of the Budget, market participants are looking for measures that reduce tax complexity, strengthen investor confidence and support long-term capital formation in the economy.

With IANS inputs