Pitch Report: Capital market players hope Budget 2025 will provide tax relief for investors

AMCs are also hoping that fund of funds (FoFs) that invest at least 90 percent of the corpus in equity-oriented funds will be taxed like equity oriented funds

With the Union Budget around the corner, the financial industry eagerly awaits measures that will provide relief to customers and support business growth.

On February 1, the Finance Minister Nirmala Sitharaman will announce the Union Budget 2025-26.

Stock brokers and asset management companies (AMCs) seek reduced taxation on securities transactions and capital gains, and incentives for technology adoption.

Tax Relief for Investors

Brokers and AMCs are seeking tax relief for their customers specifically through the lowering of Securities Transaction Tax (STT), Long-Term Capital Gains (LTCG) tax, and Short-Term Capital Gains (STCG) tax.

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The deepest impact seems to be from the doubling of STT, which was announced in the previous Budget. The rates on STT on sale of an option in securities was increased from 0.0625 percent to 0.1 percent of the option premium. Meanwhile, STT on sale of a futures contract was increased from 0.0125 percent to 0.02 per cent of the price at which such futures are traded.

LTCG was raised from 10 percent to 12.5 percent and STCG from 15 percent to 20 percent. According to brokerages and mutual-fund houses, these rates discourage investors from investing in financial products.

Segment specific demands

There are segment specific asks as well.

AMCs are also hoping that fund of funds (FoFs) that invest at least 90 percent of the corpus in equity-oriented funds will be taxed like equity oriented funds. Currently, they are treated like debt funds, therefore capital gains from FoFs are added to the investor's income and then taxed at slab rates.

Stock brokerages are also seeking incentives for technology adoption especially with the rapid pace at which the securities market is growing.

Trivesh D, chief operating officer at Tradejini told Moneycontrol that the government could focus on offering technology adoption grants or tax incentives to help brokers smoothly adopt to the T+0 settlement.