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

Ahead of Budget 2026–27, market participants have urged the government to raise the long-term capital gains exemption limit and reduce transaction-related taxes to support retail investors and encourage long-term capital formation.

As the Union Budget for 2026–27 approaches, capital market participants have called on the government to ease taxation on investments, with a key demand being an increase in the exemption limit on long-term capital gains (LTCG) from equity investments, according to a PTI report.

The Union Budget will be presented by Finance Minister Nirmala Sitharaman on February 1, when both the NSE and BSE will remain open for live trading.

In their budget wishlist, stakeholders have sought greater tax relief for retail and long-term investors. JM Financial Services has recommended raising the tax-free exemption limit on equity LTCG from ₹1.25 lakh to ₹2 lakh. The firm also suggested standardising the definition of “long term” to 12 months across asset classes such as equity, debt, gold, and real estate to simplify the tax structure.

Market participants have further proposed allowing capital losses to be set off against income under other heads, a move they say would improve flexibility and reduce tax complexity for investors.

Concerns have also been raised over transaction-related taxes, particularly the Securities Transaction Tax (STT). Dhiraj Relli, Managing Director and CEO of HDFC Securities, said stakeholders have suggested keeping STT on cash equity trades lower than that on derivatives to promote long-term investing over short-term speculative activity.

Additional recommendations include taxing only the profit portion 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 refrain from raising STT further. He added that reducing both long-term and short-term capital gains tax to 10% could significantly boost retail investor participation.

Khoday also urged the government not to increase import duties on gold and silver, noting that these commodities remain important hedging instruments against equity market volatility and rupee depreciation.

With expectations running high, market participants are looking for Budget measures that reduce tax complexity, improve investor confidence, and support long-term investment growth.