FM Sitharaman Signals Openness to Market Feedback on LTCG and STT as Budget Preparations Begin — October 13, 2026

Union Finance Minister Nirmala Sitharaman has signaled that the government remains attentive to market representations on equity taxation, refusing to rule out revisions to the Long-Term Capital Gains (LTCG) tax and Securities Transaction Tax (STT) frameworks.

Speaking at the Bloomberg New Economy Forum in New Delhi, the Finance Minister addressed persistent queries regarding calls from investors to review or abolish LTCG on equities.

"Budget prep has started, not the best time for me to say what we'll consider," Sitharaman stated, pointing out that both domestic and overseas market participants have actively engaged on the subject. "Investors in India and abroad have been commenting on this. Another question is of STT, treating all asset classes similarly. Will keenly be hearing views on this."

Investor Sentiments and Market Demands

The remarks arrive at a critical juncture as the Ministry of Finance kicks off discussions ahead of the upcoming Union Budget. Indian equity markets have witnessed periodic bouts of volatility, alongside foreign portfolio investor (FPI) outflows, prompting market veterans, brokers, and industry bodies to push for tax rationalisation.

Prominent investors have recently petitioned the Finance Ministry, contending that transactional levies such as STT, coupled with LTCG, create an onerous tax environment that dampens retail participation and foreign institutional inflows.

Key issues highlighted by market participants include:

• Double Taxation Concerns: Market participants argue that STT was initially introduced in 2004 to replace LTCG tax, but the reintroduction of LTCG in 2018 resulted in investors paying both a transaction levy and capital gains tax.
• Asset Class Parity: Stakeholders have questioned disparities in holding periods and tax rates across different asset classes, such as listed equities, unlisted shares, real estate, and fixed-income instruments.
• Impact of Increased F&O Levies: Hikes in STT rates on futures and options contracts have aimed to curb speculative retail trading, yet traders have voiced concerns regarding elevated trading friction.

Evolution of the Capital Gains Regime

The capital gains tax framework underwent a major restructuring in the July 2024 Budget, where the government raised the LTCG tax rate on listed equity shares and equity mutual funds from 10% to 12.5%. At the same time, the annual exemption threshold for long-term gains was revised from ₹1 lakh to ₹1.25 lakh, while Short-Term Capital Gains (STCG) on specified equity assets rose to 20%.

Subsequent budget exercises kept the capital gains tax rates stable, even as industry associations consistently advocated for easing transaction costs to enhance market liquidity and global competitiveness.

While Sitharaman maintained that it is premature to commit to specific fiscal measures during the initial phase of budget formulation, her acknowledgment confirms that capital market taxation remains an active agenda item during stakeholder consultations.

Tags: Ministry of Finance Nirmala Sitharaman NSE BSE SEBI Capital Gains Tax