Ahead of Budget 2026, markets seek higher LTCG exemption, lower transaction taxes

A man walks past Bombay Stock Exchange building in Mumbai

• Investors call for higher LTCG exemption and simpler capital market taxes.
• Stakeholders seek lower STT, aligned dividend taxes, and reduced capital gains tax.
• Avoid raising gold and silver import duties to support investor hedging.

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Ahead of the Union Budget for 2026–27, market participants have urged the government to ease capital market taxation, particularly by raising the exemption limit on long-term capital gains (LTCG), according to a report by news agency PTI. They have also cautioned against any further increase in transaction-related taxes.

The Union Budget will be presented by Finance Minister Nirmala Sitharaman on February 1, a day on which both NSE and BSE will hold live trading sessions.

In their budget wishlist, stakeholders have called for greater tax relief for retail and long-term investors. JM Financial Services recommended that the tax-free exemption limit on equity LTCG be raised from Rs 1.25 lakh to Rs 2 lakh.

The firm also suggested standardising the definition of “long term” to 12 months across all asset classes — including equity, debt, gold and real estate — to simplify taxation and improve clarity. It further proposed allowing capital losses to be set off against income under other heads.

Market participants have also flagged concerns over transaction taxes, particularly the Securities Transaction Tax (STT). Dhiraj Relli, Managing Director and CEO of HDFC Securities, said stakeholders have proposed keeping STT on cash equity trades lower than that on derivatives to promote long-term investing over speculative activity.

He also suggested taxing only the profit component of share buybacks and aligning dividend tax rates for domestic investors with those applicable to non-resident Indians (NRIs).

Echoing similar views, Tejas Khoday, CEO of FYERS, said the government should avoid raising STT any further. He added that cutting both long-term and short-term capital gains tax to 10 per cent would significantly encourage retail investor participation.

Khoday also expressed hope that import duties on gold and silver are not increased further, noting that these assets remain key hedging tools against equity market volatility and rupee depreciation.

With expectations running high ahead of the Budget, market participants are looking for measures that reduce tax complexity, improve investor confidence and support long-term capital formation.