C.K. Gupta
The Headline: FM Is Listening — But Hasn’t Promised Anything
On Tuesday, 13 October 2026, Finance Minister Nirmala Sitharaman told the Bloomberg New Economy Forum in New Delhi that the government is open to hearing suggestions on the removal of long-term capital gains (LTCG) tax during consultations for the upcoming Union Budget. Investors — both Indian and foreign — have been raising questions about how equity investments are taxed, including the Securities Transaction Tax (STT) and whether different asset classes should be taxed on similar lines.
Her exact caution is worth quoting: “We are very close to the Budget and the preparation for the Budget has started, and it may not be the best time for me to say what I will or what I will not consider.”
The key point: this is a willingness to hear views, not an announced change. Existing capital gains provisions continue to apply exactly as before. Let’s break down what was said, what the rules are today, and what investors should actually do.
What the FM Actually Said
- The government will “keenly hear views” on LTCG tax and STT during Budget consultations.
- Domestic and overseas investors have been discussing capital gains taxation and treating all asset classes similarly.
- Budget 2027-28 preparation has begun; the Budget is due on 1 February.
- She declined to commit to any change in tax rates.
Context matters: in a parliamentary reply on 20 July, Minister of State for Finance Pankaj Chaudhary said there was no proposal under consideration to abolish LTCG tax for domestic or retail investors. The FM’s remarks open a debate — they don’t override that position yet.
LTCG Rules Today: What You Pay Right Now
Nothing has changed. Under the current framework (revised in the July 2024 Budget), here is what applies to equity investors — for the full treatment, see our Capital Gains Tax guide:
| Item | Current rule |
|---|---|
| LTCG on listed equity shares & equity-oriented mutual funds (held > 12 months) | 12.5% on gains above &rupee;1.25 lakh per year (Section 112A) |
| STCG on STT-paid equity (held ≤ 12 months) | 20% |
| Annual LTCG exemption | &rupee;1.25 lakh (raised from &rupee;1 lakh in July 2024) |
| LTCG rate history | 10% → 12.5% in July 2024 |
| STT | A separate transaction-value levy on specified securities trades — distinct from capital gains tax |
Budget 2026 left the capital gains framework unchanged, though it did raise STT on futures and options trades. Industry bodies and foreign investors have repeatedly flagged India’s capital gains tax as a factor weighing on equity flows — foreign portfolio investors have been net sellers of Indian equities for long stretches this year.
What Investors Are Asking For
The debate has some heavyweight voices:
- ClearTax CEO Archit Gupta made a viral LinkedIn post urging a rethink: “Every major financial shift in India happens when the middle class moves its money” — arguing that letting middle-class investors keep more of their returns would encourage deeper capital-market participation.
- SBI Research has proposed abolishing LTCG tax on equities while extending the holding period to two or three years, to encourage more durable capital inflows.
- Market participants want alignment across asset classes — similar treatment for equity, debt, gold and property gains.
What This Means for Your Portfolio: A Practical View
- Do not reshape your portfolio on speculation. No change has been announced or notified. Sell/buy decisions based on a hoped-for Budget outcome can backfire — as the July 2024 Budget showed, rates can also move the other way.
- Use the &rupee;1.25 lakh annual exemption smartly. Harvest up to &rupee;1.25 lakh of long-term equity gains each financial year, tax-free, by booking and re-buying. It’s the one lever already in your hands — run the numbers on our LTCG calculator.
- Keep STT in the picture. Any debate on LTCG will likely drag STT along — the two taxes on equity interact, and the FM named both.
- Watch the pre-Budget consultation calendar. Industry bodies will submit wish-lists in the coming weeks; the real signal arrives when the Budget speech does, on 1 February.
- Talk to your CA before March. If you’re sitting on large unrealised gains, a year-end harvesting plan drawn up now beats a rushed one in February.
FAQs
Has the government removed LTCG tax?
No. Finance Minister Sitharaman only said the government is open to hearing views on LTCG tax and STT during Budget 2027-28 consultations. No change has been announced or notified — existing provisions continue to apply.
What is the current LTCG tax rate on stocks and equity mutual funds?
12.5% on long-term gains (assets held for more than 12 months) exceeding &rupee;1.25 lakh in a financial year, under Section 112A. Short-term gains on STT-paid equity are taxed at 20%. These rates were set in the July 2024 Budget.
When is Budget 2027-28?
The Union Budget 2027-28 is due to be presented on 1 February 2027. Consultations with industry and investors are already underway.
What is STT, and why is it part of the debate?
The Securities Transaction Tax is a levy on the value of specified securities transactions — separate from capital gains tax. Investors and the FM herself have raised it alongside LTCG because the two together determine the effective tax on equity investing.
Should I delay selling my shares hoping LTCG is removed?
That would be speculation, not planning. No proposal to abolish LTCG was under consideration as of the Finance Ministry’s July 2026 parliamentary reply, and the FM has made no commitment. Plan around current law — including the &rupee;1.25 lakh annual exemption — and review after the Budget.
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