As the Union Budget for 2026-2027 approaches, market participants are actively calling on the government to reconsider capital market taxation. They strongly oppose any increase in transaction levies. Finance Minister Nirmala Sitharaman will present the Budget on February 1. Investors and brokerage firms have submitted several proposals. They believe these measures will make long-term investing more appealing, especially for retail participants.
Key Demands for Capital Gains Relief
One major request involves long-term capital gains from equity investments. Market stakeholders want the tax-free exemption limit raised. They argue the current threshold provides little comfort to small, long-term investors. JM Financial Services has formally proposed increasing the equity LTCG exemption limit from Rs 1.25 lakh to Rs 2 lakh.
The firm also recommends a uniform definition of "long term" as 12 months across all asset classes. This includes equity, debt, gold, and real estate. They state this change would simplify the tax structure and improve clarity for everyone. Another suggestion from the brokerage is to allow capital losses to be adjusted against income from other sources.
Concerns Over Transaction Levies
Market participants have expressed serious concerns about transaction-related taxes. They warn against any further hikes. Dhiraj Relli, MD and CEO of HDFC Securities, shared his views. He said stakeholders prefer keeping the securities transaction tax on cash equity trades lower than on derivatives. This approach aims to discourage speculative activity and promote longer-term investment.
Relli further suggested that only the profit element of share buybacks should be taxed. He also proposed aligning dividend tax rates for domestic investors with those for non-resident Indians.
Calls for Tax Cuts and Stability
Tejas Khoday, CEO of FYERS, also urged the government not to increase STT any further. According to him, reducing both long-term and short-term capital gains tax to 10% would significantly boost retail investor participation in the markets.
Khoday added that import duties on gold and silver should not be raised again. He pointed out these commodities remain important hedges against equity market volatility and rupee weakness. Investors often rely on them during uncertain times.
Special Trading Session on Budget Day
Separately, the National Stock Exchange and the BSE will remain open for live trading on Sunday, February 1. This is the same day the Union Budget is presented. The special session allows investors to react immediately to budget announcements.
The market's pre-budget proposals highlight a clear desire for tax reforms. Stakeholders seek a simpler, more favorable environment to encourage long-term investment and broader retail participation.
