Sitharaman Says Government Will Hear Long-Term Capital Gains Tax Proposals Ahead of Union Budget

Finance Minister Nirmala Sitharaman said on October 13, 2026, that the government would hear proposals to remove or change the long-term capital gains tax during consultations for the upcoming Union Budget. She did not announce that the tax would be abolished.

Speaking at the Bloomberg New Economy Forum 2026 in New Delhi, Sitharaman tied the discussion to investor questions about equity taxation and the treatment of different asset classes. Preparations for the Budget had already started.

“We are very close to the budget and the preparation for the budget has started, and it may not be the best time for me to say what I will or what I will not consider.”

The minister stopped short of endorsing any proposal. She said the government would consider debate among investors, rather than indicate which changes it might adopt.

Sitharaman said both Indian and foreign investors had been commenting on capital-gains rules. The discussion also includes the securities transaction tax and whether different classes of assets should receive comparable treatment.

Budget preparation has begun, but the tax decision has not

“LTCG, a lot of people are commenting on, both Indian and foreign investors,” Sitharaman said. She described the wider discussion over market transaction levies and asset treatment as healthy.

“This debate on STT in market and question of treating all asset classes similarly, there is a lot of debate. It is healthy to have this debate.”

The remarks are an invitation to submit views, not confirmation of a government plan. On July 20, 2026, Minister of State for Finance Pankaj Chaudhary gave Parliament a more definite account of the government’s position at that time.

“At present, there is no such proposal under consideration,” Chaudhary said in the parliamentary response. Sitharaman’s October comments have not replaced that statement with an announced decision.

The minister has also said the government sought to bring different asset classes “at par,” so tax advantages would not drive investment choices. The debate, therefore, reaches beyond whether equity gains should face a different rate.

Listed equity gains currently face a 12.5% rate

Listed shares and equity-oriented mutual funds currently face a 12.5% tax rate on long-term gains. That treatment also applies to equity returns earned by foreign portfolio investors.

The reported long-term holding period for listed equity and equity-oriented funds is more than 12 months. An annual exemption covers gains up to ₹1.25 lakh.

A proposal from SBI Research would change both the holding period and the tax treatment. It recommends extending the period required for equity investments to qualify as long-term to two or three years, while abolishing the tax on equity gains.

The proposal pairs a longer investor commitment with tax relief. It presents abolition as a way to encourage longer-term investment and help stabilise foreign capital flows, rather than as a change Sitharaman has approved.

A research proposal links tax relief to longer holding periods

SBI Research cited foreign selling as part of the case for reviewing the rules. Foreign investors had sold ₹44,166 crore of Indian shares in October 2026 up to the report’s publication, bringing equity withdrawals for the year to ₹3.04 lakh crore.

The figures place the tax proposal against a backdrop of withdrawals, but the research recommendation remains separate from government policy. Sitharaman’s comments opened discussion; they did not adopt the proposed holding-period extension or tax removal.

Punit Shah, a partner at Dhruva Advisors, said there was a case for restructuring the regime. He supported considering abolition for listed equity and changing the holding-period rules.

“Considering the current economic situation, there is a reasonable case for the FM to consider rationalisation of the LTCG regime.”

Shah’s suggestion and the SBI Research proposal both address equity taxation, but they do not amount to a government announcement. The minister has not specified what, if anything, she will include in the Budget.

The 2026 budget raised transaction levies on equity derivatives

A separate part of the market-tax debate concerns levies on derivative trades. The 2026 budget increased rates for three categories of equity derivatives, adding to discussion about the combined cost of transactions and investment gains.

The increases concern transaction levies, while the capital-gains debate concerns tax on investment returns. Investors and advisers have raised both as part of a broader discussion about how market activity and asset classes are taxed.

Sitharaman has also pointed to private capital flowing into renewable energy and semiconductor or chip manufacturing. Those sectors sit alongside the government’s interest in attracting longer-term investment, even as debate continues over equity taxation and foreign-capital withdrawals.

As of October 13, 2026, the finance minister had left the issue open for Budget consultation. Her comments did not announce an abolition, and Chaudhary’s July parliamentary response remains the latest stated formal position that no such proposal was under consideration.