Budget 2027: Where the demand for LTCG tax exemption on equity shares stands now; explained in 5 points

Even as more than two months are still left before the Union Budget for 2027-28 to be presented on February 1, three separate sets of recommendations have already converged on one demand in the last few days. The demand is about easing the tax burden on long-term capital gains (LTCG) from equity.

Industry bodies like FICCI and ASSOCHAM have put the issue in their pre-Budget memoranda to the Finance Ministry, according to media reports. SBI Research separately argued in a November 2 report that abolishing the levy would be affordable.

Here are five points that readers should know about where the demand stands:

1)FICCI wants the LTCG exemption back, with a higher STT if needed. As per a document on the FICCI portal citing an Economic Times report, the industry body has pressed the government to restore the long-term capital gains (LTCG) tax exemption on listed shares in the Union Budget 2027-28. It has also sought lighter TDS rules, faster tax appeals and clearer taxation of foreign firms.

In its recommendations to Finance Minister Nirmala Sitharaman, the chamber pointed said capital gains tax, charged on top of the securities transaction tax (STT), eats into returns from equities, and needs a review to make India a more attractive place to invest

2)ASSOCHAM has proposed a a graded rate, not a blanket exemption. As per a report by the Business Standard, ASSOCHAM has taken a more calibrated route. In its pre-budget memorandum, it has suggested reducing the LTCG rate on listed securities to 10% for holdings of more than one year but less than two, and a nil or reduced rate of around 5% for investments held beyond two years. Alternatively, it has also proposed allowing credit for STT against LTCG liability on long-term holdings.

3)SBI Research's Ecowrap report dated November 2 has estimated that LTCG collections were about ₹1 lakh crore in FY26 and will be ₹40,000-50,000 crore in FY27, far below the ₹1.3 lakh crore mopped up in FY25, when a 30% rally in the previous year let foreign investors book gains. It has argued that the FY28 shortfall from abolition "will be only in the range of ₹40,000-50,000 crore / 0.1%-0.2%" of GDP.

"We believe the Government would be able to take this hit if hypothetically, the entire capital gains taxes were abolished," the report said.

SBI Research has also proposes that, "in line with sale of property, in MF redemption, Government can defer LTCG tax proportionately, when the sale proceeds are reinvested in eligible equity MF within 90 days," and that a 50% STT hike would raise about ₹45,000 crore in FY28. Its illustrative table suggests raising the exemption to ₹2 lakh, a 5% rate for two-to-three-year holdings and zero beyond three years.

5)Nothing changes for your tax return this year. The current regime, in force since July 23, 2024, taxes long-term gains on listed equity and equity funds at 12.5% above ₹1.25 lakh a year and short-term gains at 20%. SBI Research's note is a research recommendation, not a Budget proposal, and the chambers' demands are requests the government is free to accept or reject.