Sitharaman signals openness to investor views on capital gains tax ahead of Budget

Union Finance Minister Nirmala Sitharaman stated on Tuesday that the government remains open to receiving stakeholder feedback on capital gains tax and securities transaction tax ahead of the upcoming Union Budget. Speaking at an economic forum in New Delhi, the minister acknowledged that domestic and international participants have actively discussed equity taxation frameworks.

The remarks bring market taxation back into sharp focus as policymakers begin formal preparations for the 2027-28 fiscal plan. Investor groups and industry bodies have persistently flagged capital gains levies and transaction charges as key elements influencing equity flows, making the dialogue central to broader discussions on market stability and capital retention.

Addressing an audience at the Bloomberg New Economy Forum, Sitharaman noted that comments regarding long-term capital gains tax and securities transaction tax have come from diverse quarters. She observed that the broader conversation also extends to whether distinct asset classes should face uniform tax treatment. According to the finance minister, examining these differing perspectives forms a healthy part of pre-budget deliberations.

At the same time, Sitharaman declined to make any immediate commitments regarding potential policy rollbacks or rate adjustments. Pointing out that preparatory work for the budget has only recently commenced, she emphasized that advance announcements or premature disclosures on specific tax items would be inappropriate.

The ministerial comments followed recent analytical inputs from institutional researchers. A study published by SBI Research recommended that the government evaluate abolishing the long-term capital gains tax on equities while extending the minimum holding duration to two or three years. The research argued that such structural shifts would help anchor durable capital and reduce short-term volatility.

Foreign portfolio investors have sustained capital withdrawals from domestic equities through several stretches of the year, bringing foreign capital movements under intense scrutiny. Current tax rules levy a 12.5 per cent long-term capital gains tax on listed equities and equity mutual funds held beyond 12 months, alongside an exemption threshold of ₹1.25 lakh per year, following adjustments enacted in previous fiscal exercises.

Market participants responded positively to the minister's observations, with benchmark indices registering upward movement during the trading session. Analysts note that while the official stance remains non-committal, the willingness to engage with investor concerns leaves room for structural petitions as formal memorandum submissions proceed over the coming months.