As Finance Minister Nirmala Sitharaman presents the Union Budget 2026-27 on February 1, the stock markets this time will remain open on Sunday for the budget presentation.
Ahead of the Union Budget 2026-27, stock market investors have requested the government to simplify capital market taxation. Along with a higher exemption limit for long-term capital gains (LTCG), stock market investors have suggested that the government should refrain from further increases in transaction taxes.
As Finance Minister Nirmala Sitharaman presents the Union Budget 2026-27 on February 1, the stock markets this time will remain open on Sunday for the budget presentation. The demand for an increase in the tax-free exemption limit on long-term capital gains from equity investments is aimed at providing greater relief to retail and long-term investors.
What are the demands from the government?
According to JM Financial Services, the government should raise the tax-free exemption limit for long-term capital gains on equity from Rs 1.25 lakh to Rs 2 lakh. The company, in its demand, has also requested standardisation of the definition of ‘long-term’ to 12 months across all asset classes, including equity, debt, gold, and real estate. This is aimed at reducing complexity and further improving tax clarity.
Additionally, the company has urged that capital losses be allowed to be set off against income from other sources. Market participants have warned against any further increase in transaction-related taxes.
“Given that significant tax reforms have already been implemented in the past two years, this Budget may lean more towards expenditure-side initiatives. However, any changes to capital gains taxation could influence near-term equity market sentiment. Markets will also watch for innovative government strategies to tap the growing investment appetite for precious metals,” said Namrata Mittal, CFA, Chief Economist, SBI Mutual Fund.
Proposal to keep STT on cash equity deals lower than on derivatives
Dhiraj Relli, Managing Director and Chief Executive Officer of HDFC Securities, has emphasised one of the crucial demands of the stakeholders as they seek the government to keep the Securities Transaction Tax (STT) on cash equity deals lower than on derivatives to encourage long-term investments rather than speculative trading.
Shubham Gupta, CFA and Co-founder of Growthvine Capital, is also of the view that there needs to be a sustainable capital gains tax structure.
“For investors, there needs to be a sustainable capital gains tax structure. Furthermore, there should be no additional increase in capital gains tax rates and a review of the STT (Securities Transaction Tax), since it may no longer be serving its intended purpose,” Gupta said.
The suggestion also includes taxing only the profit portion of share buybacks, while aligning dividend tax rates for domestic investors with those applicable to non-resident Indians.
