Finance Minister Nirmala Sitharaman said on 13 October 2026 that the government is open to hearing views on the long term capital gains (LTCG is the profit from selling an asset such as shares, mutual fund units or property after holding it beyond the qualifying period. Read the full meaning of LTCG) tax and the securities transaction tax (STT) during the Budget consultations. As of mid-October, no change to either tax had been announced or proposed, and these Budget 2027 expectations on LTCG and STT remain only expectations.
She did not say that STT would be reduced. The remark was about listening to views, and it has not been followed by any proposal from government.
Even so, many investors have started speaking about it as a possible relief. In groups of retail investors and on market discussion platforms, individuals are asking whether the next Budget will bring lower taxes on their equity investments, and some are already planning their next year on that hope.
The asks from market participants are fairly clear. As per Zee Business, they are requesting lower STT, a rollback of the higher capital gains tax rates and a simpler tax structure, so that more retail investors are encouraged to take part in the market.
The debate is louder this time because of the recent market conditions. The same report says that muted returns and outflows by foreign institutional investors (A foreign portfolio investor (FPI) is an overseas entity registered with SEBI that buys Indian shares and bonds for returns without taking control. Read the full meaning of FII and FPI) have intensified the discussion on STT and capital gains. Investors who have seen modest gains on their portfolios are now looking more closely at how much of those gains goes towards taxes and transaction charges.
The Budget for FY2027-28 is expected in early 2027. The date was not confirmed in the reports available at the time of writing, and the consultation phase is still going on.
Until the Finance Minister presents the Budget, any cut in LTCG or STT is speculation. What has been confirmed so far is only that the government is willing to listen, and the investors who are hoping for relief will have to wait for the official proposals to see whether their suggestions have been taken up.
The four things investors are tracking
Within the retail investor community, the discussion around Budget 2027 has narrowed down to four points. As per BW CFO World, investors are watching the treatment of equity gains, the exemption threshold, the holding period rules and the future of STT.
- The treatment of equity gains, that is, the rate at which profits from shares and equity mutual funds will be taxed
- The exemption threshold, which decides how much of the yearly gains will remain free of tax
- The holding period rules, which decide when a gain is counted as long term
- The future of STT, which is charged whenever shares are bought or sold
Many individuals speak about LTCG and STT as if they were one tax and the two are quite different in how they work. STT is a charge on the transaction itself, so a change in STT will alter the transaction costs that an investor pays on each trade, whether the trade ends in a profit or a loss.
LTCG is a tax on the gain. It is applicable only when an investment is sold at a profit after the required holding period, and a change in it will alter the tax paid on those gains. Investor who has not sold anything during the year will not see any LTCG at all, though the investor may still have paid STT on earlier purchases.
For this reason, a reduction in one will not give same relief as a reduction in the other. An investor who trades frequently will be more affected by STT, while an investor who holds shares for many years and sells occasionally will look mainly at the LTCG rate and the exemption limit.
It is also not the case that STT has been moving only in one direction. Zee Business reports that Budget 2026 had raised STT on futures and options, with the aim of curbing speculative and high frequency trading. So, while retail investors are asking for lower STT in general, the most recent change in this tax was an increase and it was meant for a particular kind of trading.
This shows that the government has used STT in the past as a tool for discouraging certain trading activity, and not only as a source of revenue. Whether it will be reduced for some kinds of transactions while remaining higher for others is something that has not been indicated in any statement so far.
Investors who deal mostly in delivery based buying, where shares are held in the A demat account is an electronic account that holds an investor's shares, bonds, ETFs and mutual fund units in digital form instead of paper certificates. Read the full meaning of Demat Account, and those who trade in derivatives are therefore looking at the same Budget with different expectations. Alongside this, the holding period rules are being watched by those who sell after a year or two, since any change there will decide which of their gains are taxed at the long term rate.
Who a cut would actually help
The illustration shared by Daily Financial shows that a cut in LTCG does not help every small investor in the same way. If the exemption threshold is raised, an investor with gains of Rs 2 lakh will pay no tax at all on those gains. For investor with gains of Rs 25 lakh, the same higher exemption will save only Rs 9,375.
A lower tax rate works differently. As per same illustration, a lower rate mostly helps the large investors, since the saving grows with the size of the gain. Individuals with modest portfolios will see a much smaller benefit from it.
Another option being discussed is a lower STT on delivery trades, or on trades by foreign investors, while leaving the traders unaffected. Daily Financial reports this only as an idea under discussion, and the government has not said anything about it. Such a change will matter more to investors which buy shares and keep them in the demat account than to those who trade many times in a day.
BW CFO World reports one more proposal, a nil LTCG rate for investments that are held for a longer period. The purpose of it would be to reward patient capital and to make India more attractive to investors.
All of these are proposals from market participants and commentators, and no decision has been taken on any of them. Many families which hold shares for several years are following these suggestions closely, while the Finance Minister has so far said that views will be heard.
The two LTCG ideas will have different effects on investors and this difference is not always mentioned in the online discussions. According to the Daily Financial illustration, a higher exemption threshold removes the tax entirely for investors with small gains, while a lower rate mostly helps the large investors. Individuals with modest portfolios will therefore be looking at the exemption limit first, as the relief for them is seen in that proposal.
The idea regarding STT works in another way. The option under discussion is a lower STT on delivery trades or on trades by foreign investors, with traders left unaffected. Such a change would move in a direction opposite to the increase on futures and options in Budget 2026. There is no statement from the government on the manner in which the two kinds of trading will be separated for this purpose.
The nil LTCG proposal, as reported by BW CFO World, is connected with investments held for a longer period. In the reports available at the time of writing, there is no mention of the length of that holding period or of the investments that will be covered under it. For now, the investors who hold shares for many years will have to wait for these details to be announced.
These ideas have been put forward by market participants and commentators. There is no indication that the government has accepted any of these ideas and the Finance Minister has spoken about hearing views during the Budget consultations.
Families holding equity investments for a long time are following these proposals closely, and the official position has remained same since 13 October.
Reassurance versus rate cuts
Coverage of the previous Budget, for FY2026-27, had looked at this debate from a slightly different side. Outlook Money had said then that the biggest boost to the confidence of retail investors may come from reassurance, and not from a tax cut. That article is now a few months old and it is used here only as background.
The same coverage had listed A dividend is a part of a company's profit that the board decides to pay to shareholders, usually in cash, in proportion to the shares held. Read the full meaning of Dividend tax parity and capital gains clarity as the issues to watch, many investors were still raising these two points in their discussions in October 2026, along with the LTCG and STT demands.
An expert quoted by Outlook Money had spoken about the steps that reduce the effort of taking part in the market. The expert said:
"Measures that lower friction for retail participation, such as simplified KYC, rationalised STT on delivery trades, and clearer, uniform rules across platforms, would also improve sentiment."
It is worth seeing that the quote mentions STT on delivery trades, which is close to one of the options now being discussed. However, the quote was given for the earlier Budget, and it cannot be read as a sign of what government intends this time.
Clear and uniform rules are something that individual investors talk about often. A family which invests every month through mutual funds or shares generally wants to know in advance how the gains will be taxed, so that the tax treatment does not change from one Budget to the next. Whether the government will give such a statement of continuity, or will announce a change in rates, has not been indicated anywhere.
Until now, the Finance Minister has only said that the government is open to views on LTCG and STT. No proposal has been made public, and no official paper on capital gains has been released in the reports available at the time of writing.
The date of the Budget was not confirmed in these reports. For this reason, the consultation phase and any official announcement that comes out of it are the next things that investors will be watching.
