Finance Minister Nirmala Sitharaman on Tuesday refrained from ruling out potential changes to the long-term capital gains (LTCG) tax regime, stating that preparations for the next Union Budget have started and it was not the right moment to specify what the government might consider.
Speaking at the Bloomberg New Economy Forum in New Delhi, Sitharaman acknowledged that both domestic and foreign investors have been discussing the LTCG tax issue.
She also highlighted securities transaction tax as a connected concern and noted that market participants have questioned whether all asset classes should be treated uniformly.
The minister assured that the government is attentive to various views on these matters.
This statement comes as the government prepares for the Union Budget 2027-28, scheduled for presentation on February 1, 2027.
Currently, long-term capital gains on listed equities and equity mutual funds held for more than one year are taxed at 12.5%, with an exemption on gains up to Rs 1.25 lakh annually.
These rules were revised in the July 2024 Budget, which increased the LTCG tax rate from 10% and raised the exemption limit from Rs 1 lakh.
The Budget 2026 maintained the existing capital gains tax structure, despite expectations for a lower tax rate or higher exemption by some market sections.
However, it raised the securities transaction tax on futures and options trading.
Industry groups and foreign portfolio investors have repeatedly argued that India’s capital gains tax framework hampers the competitiveness of domestic equity markets and discourages investment flows.
Foreign investors have also been net sellers of Indian equities for prolonged periods this year.
Following the finance minister’s remarks, equity markets responded positively, with benchmarks Sensex and Nifty each ending over 1% higher.