FICCI urges removal of LTCG tax exemption and proposes higher STT in 2027-28 budget

The Federation of Indian Chambers of Commerce and Industry (FICCI) has asked the government to reinstate the long-term capital gains (LTCG) tax exemption on listed securities in the Union Budget for 2027-28. It said the revenue shortfall could be covered by increasing the securities transaction tax (STT) on delivery-based trades.

FICCI noted that investors have been subject to both LTCG tax and STT since the former was reintroduced in 2018, which it claims reduces post-tax equity returns. The body recommended that the revised tax regime remain in place for about a decade to give investors certainty.

The 2018 budget introduced a 10% tax on qualifying LTCG above ₹1 lakh; the 2024-25 budget raised the rate to 12.5% and increased the exemption threshold to ₹1.25 lakh, while also raising the short-term capital gains rate to 20%. SBI Research estimates that eliminating the LTCG tax would cost the exchequer roughly ₹50,000 crore.

FICCI also suggested allowing foreign investors to calculate capital gains in the currency of their original investment, arguing that rupee depreciation can create taxable gains in rupee terms even when the underlying foreign-currency gain disappears.

In addition, the chamber urged the removal of the 0.1% tax deduction at source (TDS) on qualifying purchases of goods and e-commerce transactions between businesses, saying these are already captured through GST reporting and that the deduction ties up working capital.

Other proposals included extending the carry-forward of business losses and unabsorbed depreciation after mergers to all sectors, providing relief for taxpayers with appeals pending over two years, imposing a full stay on disputed tax demands, halting recovery through refund adjustments, and waiving interest for the delay period.