FM keeps door open to LTCG tax ahead of Budget 2027

New Delhi Finance Minister Nirmala Sitharaman on Tuesday declined to rule out changes to the long-term capital gains (LTCG) tax regime, saying preparations for the next Union Budget have begun but it was too early to indicate the government's position. Speaking at the Bloomberg New Economy Forum, Sitharaman acknowledged that investors in India and abroad have been raising concerns about the country's capital gains tax framework. She said the government would carefully consider views on the issue as it prepares the Union Budget for 2027-28, scheduled to be presented on February 1, 2027. The minister also highlighted the securities transaction tax (STT) as a related matter, noting that market participants have questioned whether different asset classes should be treated similarly. She indicated that the government would listen closely to feedback on both taxation issues. Under the current rules, long-term capital gains on listed equities and equity mutual funds held for more than one year are taxed at 12.5 per cent. Gains of up to Rs 1.25 lakh annually are exempt from the tax. These provisions were introduced in the July 2024 Budget, when the government raised the LTCG tax rate from 10 per cent and increased the annual exemption threshold from Rs 1 lakh. The Union Budget 2026 retained the existing capital gains tax structure despite expectations among some market participants for a lower rate or a higher exemption limit. However, it increased the STT applicable to futures and options trades. Industry groups and foreign portfolio investors have argued that India's tax framework affects the competitiveness of domestic equity markets and investment flows. Foreign investors have also remained net sellers of Indian equities for extended periods this year. Following Sitharaman's remarks, domestic equity benchmarks gained ground, with the Sensex and Nifty closing more than 1 per cent higher each.