Finance Minister Nirmala Sitharaman has sparked speculation over possible relief from long-term capital gains (LTCG) tax after saying the government would be keen to hear views on its removal during the upcoming Budget consultations.
Speaking at the Bloomberg New Economy Forum in New Delhi on Tuesday, Sitharaman said discussions around equity taxation also covered the securities transaction tax (STT) and whether different asset classes should be subject to similar tax treatment.
LTCG TAX AND STT IN FOCUS
The taxation of equity investments has become an important issue for domestic and foreign investors, Sitharaman said.
Discussions have included the possibility of abolishing LTCG tax, the role of STT in stock market transactions and whether tax rules should be aligned across different asset classes.
The issue could feature in consultations ahead of the upcoming Union Budget, as investors continue to seek greater clarity and a more streamlined tax framework. However, Sitharaman’s remarks do not amount to a formal announcement of any proposed tax changes.
Punit Shah, partner at Dhruva Advisors, said the current economic environment provided a reasonable case for rationalising the LTCG tax regime.
“Considering the current economic situation, there is a reasonable case for the FM to consider rationalisation of the LTCG regime,” Shah said.
He suggested that the government could consider abolishing LTCG tax on listed equity shares and reducing the holding period required for shares to qualify as long-term assets.
Shah also pointed to the additional tax burden arising from STT, which was introduced in lieu of capital gains tax on securities transactions.
According to him, the combined tax burden can make equity transactions more expensive and less attractive, potentially affecting foreign capital inflows. Rationalising LTCG taxation could also simplify compliance requirements and administrative processes, he added.
INFRASTRUCTURE PIPELINE CROSSES $4.5 TRILLION
Sitharaman also highlighted India’s infrastructure development and financing needs, noting that the National Infrastructure Pipeline, launched in late 2019, had crossed $4.5 trillion.
She underlined the role of the National Bank for Financing Infrastructure and Development (NaBFID) and the National Investment and Infrastructure Fund (NIIF) in mobilising capital for infrastructure projects.
The Finance Minister said India had made considerable progress in expanding capacity across sectors over the past decade and expected the momentum to continue.
INVESTMENT IN TECHNOLOGY AND CLEAN ENERGY
Sitharaman said domestic capital was increasingly flowing into sectors such as renewable energy, semiconductor manufacturing, chip design, biosimilars, pharmaceutical manufacturing and maintenance, repair and overhaul (MRO) facilities.
She highlighted India’s growing ambitions in semiconductor manufacturing, including advanced chips, chip design and packaging, alongside technologies supporting the development of artificial intelligence (AI).
India has also attracted investments in data centres, transmission infrastructure, green hydrogen and green ammonia, she said.
The government is pursuing the manufacture of both advanced semiconductors using finer nanometre technology and less advanced chips, which remain essential for several industries.
Sitharaman also pointed to opportunities in civil aviation, a sector she said was growing at around 16%.
While her comments have renewed attention on the possibility of LTCG tax relief in Budget 2027, any changes will depend on the government’s eventual policy decisions and formal Budget announcements.