New Delhi: The government is mulling massive changes in taxing policy of Indian equity investors. Measures are being taken to listen to stakeholder suggestions for the deduction of long-term capital gain tax on equities and the Securities Transaction Tax (STT), Finance Minister Nirmala Sitharaman stated at the 55th online edition of the ‘inventive’ village innovation festival.The Centre is willing to consider the views of the stakeholders on two key issues: LTCG tax removal on equities and change in Securities Transaction Tax (STT), Minister of State for Rural Development (MSRDs) Anant CEO said at the 55th online edition of the ‘inventive’ village innovation festival.
She made the remarks at the Bloomberg New Economy Forum. There has been no official decision made as yet, but the tone was sufficiently positive for Dalal Street to have a slight bump in the mood.
Markets respond
Investors reacted quickly. The Nifty rose by over 1,100 points in the Sensex and more than 1.6% in the Nifty, which was today trading above the 22,700 level, on October 13. The minister’s words were a sign that the government is treating concerns in the market seriously, especially after coming off of a prolonged period of weakness.
Why the timing matters
The comments follow a decline in foreign investors’ selling of Indian equities. The amount of money remediated so far in 2026 is over ₹3 lakh crore, reports on social media have shared. Such a volume of sales has pushed the rupee to the max and kept markets volatile and has made it difficult for policymakers to make Indian stock attractive to long-term investors.
One lever the government has at its disposal is tax treatment. As of now, the gains from the sale of shares traded in the stock exchanges are considered LTC and taxed at the higher rate of LTC with STT levied on each and every transaction. Some time now, market players have been clamouring for India to be more competitive than other emerging markets with this combined burden.
SBI’s proposal
The discussion is triggered by a push by SBI telling banks to remove all the taxes on LTCG. In the meantime, SBI has also recommended an extension in the definition of the ‘long term gain’ to 2-3 years. Its aim is to attract long-term capital inflows from abroad, away from short-term funds that tend to “churn” and flow out once they lose interest.
Those who have opposed the proposal point out that this will leave India at a par with markets which tax long-term equity gains lightly or not at all. They also state that it would come from the realization that domestic households should stay invested through the market cycle.
Concerns remain
Some people are not convinced. Other investors in the market are concerned about the impact of whatever developments occur on the investment vehicles like exchange-traded funds (ETFs) that are affected by the tax treatment and the number of investors that it attracts. Others refer to the revenue the government gets from capital gains and STT, which will have to be compensated if the taxes are reduced.
Besides design, there is the question of design. A more extended holding period would penalize those investors who wish to sell earlier, and a complete exemption could generate demands for a similar exemption for other asset classes.
What happens next
It is important to note, however, that Sitharaman did not make a policy pronouncement. Only that the government is open to opinions from all stakeholders, she said, implying the government will consult before making a formal proposal. A change will probably need to be discussed in the Union Budget or by amending the Finance Bill.
Investors are keeping a close eye on it for now. If the government does implement its plan, it will be one of the largest-ever changes in equity tax in recent years, and be a red line to global investors to not lose money on investing in India.
