The PHD Chamber of Commerce and Industry (PHDCCI) has urged the government to abolish long-term capital gains (LTCG) tax on listed equities and reduce the short-term capital gains (STCG) tax rate to 10 per cent from the current 20 per cent, arguing that rationalising capital market taxes could help attract foreign investment and boost retail participation.
The representation comes amid renewed debate over capital market taxation, following an SBI Research recommendation to abolish LTCG tax on equities and extend the holding period to two-three years.
Finance Minister Nirmala Sitharaman had also said on October 13 that the government was open to hearing views on LTCG tax and securities transaction tax (STT), though she made no commitment to changes in Budget 2027.
In a representation to Central Board of Direct Taxes (CBDT) Chairman Ravi Agrawal, the industry body also suggested extending the holding period for long-term capital gains exemption from 12 months to 18-24 months to ensure that the benefit accrues to genuine investors.
According to PHDCCI, foreign portfolio investors (FPIs) withdrew Rs 3.08 trillion ($32.73 billion) from Indian equities in the first nine months of calendar year 2026, nearly double the Rs 1.66 trillion withdrawn in the whole of 2025.
The chamber also cited international examples, noting that countries such as Singapore and the UAE do not levy capital gains tax, while Malaysia generally exempts gains from listed securities.
It said India could draw lessons from these tax regimes to improve its investment appeal.
PHDCCI said STT was introduced in October 2004 to simplify securities transaction taxation, alongside the abolition of LTCG tax and a reduction in STCG tax from 33 per cent to 10 per cent.
LTCG tax was reintroduced in 2018-19 at 10 per cent, while STCG tax had earlier been raised to 15 per cent, the chamber said.
PHDCCI argued that the parallel levy of capital gains tax and STT amounted to multiple taxation of the same economic activity.
While capital gains tax applies to profits, STT is levied on transaction value irrespective of whether an investor makes a profit, it said.
The chamber has proposed three alternatives — abolishing LTCG tax while extending the holding period, reducing STCG tax to 10 per cent, or lowering STT rates.
According to government data, STT collections stood at Rs 57,522 crore in FY26, up from Rs 53,296 crore in FY25.
The Union Budget has projected STT collections of Rs 73,700 crore for 2026-27.
PHDCCI argued that a more balanced tax regime could improve post-tax returns, encourage household savings to flow into financial assets and support long-term wealth creation.
