Market participants are actively voicing their demands for tax relief as the Union Budget for 2026-27 approaches. They have urged the government to ease capital market taxation significantly. Their primary request involves a higher exemption limit on long-term capital gains.
Key Demands from Market Stakeholders
Finance Minister Nirmala Sitharaman will present the Union Budget on February 1. In anticipation, stakeholders have submitted a detailed wishlist. They want greater relief for retail and long-term investors through enhanced tax benefits.
Raising the LTCG Exemption Limit
JM Financial Services has made a specific recommendation in its budget submission. The firm suggests raising the tax-free exemption limit for equity long-term capital gains from the current ₹1.25 lakh to ₹2 lakh. This increase would provide substantial financial relief to many investors.
Standardizing the Definition of "Long Term"
The firm also proposed a crucial standardization. It seeks to define "long term" uniformly as 12 months across all asset classes. This change would apply to equity, debt, gold, and real estate. The goal is to reduce complexity and improve overall tax clarity for everyone involved.
Allowing Capital Loss Set-Off
Another important suggestion involves capital losses. Market participants want the government to allow these losses to be set off against income from other heads. This measure would help investors manage their financial portfolios more effectively.
Caution Against Further Transaction Tax Hikes
Participants have issued a strong caution. They advise the government to avoid any further increases in transaction-related taxes. This warning comes amid concerns about market liquidity and investor sentiment.
Views from Industry Leaders
Dhiraj Relli, Managing Director and CEO of HDFC Securities, shared specific proposals. He suggested keeping the Securities Transaction Tax on cash equity trades lower than on derivatives. This differential aims to encourage long-term investing over speculative trading activities.
Relli also recommended taxing only the profit component of share buybacks. Additionally, he proposed aligning dividend tax rates for domestic investors with those applicable to non-resident Indians. These steps could create a more equitable tax environment.
Tejas Khoday, CEO of FYERS, echoed the sentiment on transaction taxes. He firmly stated that the government should refrain from raising STT any further. Khoday believes reducing both long-term and short-term capital gains tax to 10 per cent would significantly boost retail investor participation in the markets.
Khoday also addressed precious metals. He expressed hope that import duties on gold and silver are not increased further. He emphasized that these assets remain important hedging instruments against equity market volatility and rupee depreciation.
Market Preparations for Budget Day
Meanwhile, the National Stock Exchange and Bombay Stock Exchange have announced special arrangements. They will conduct live trading on Sunday, February 1, when the Union Budget is presented. This allows market participants to react immediately to the fiscal announcements.
The collective voice from the market is clear. Stakeholders seek a budget that fosters growth, simplifies taxation, and supports long-term investment strategies. All eyes are now on the government's response in the upcoming financial blueprint.
