Union Budget 2026: LTCG, STCG tax cut on cards? Here's what analysts say 

The taxation in equity market has always attracted demands and suggestions from various stakeholders. Ahead of Budget 2026, the stock market has turned volatile with investors counting losses in midcap and small cap stocks. The correction in BSE midcap (5.77%) and BSE smallcap indices (9.12%) this year signals the negative sentiment in the broader market ahead of Union Budget on February 1.

With portfolios' values shrinking due to the impending India-US trade deal, unabated FIIs sell-off and global geopolitical tensions, here's a look at what analysts expect from FM Nirmala Sitharaman's Budget speech on February 1 on the equity taxation front.

Shrey Jain, Founder and CEO SAS Online - India’s Deep Discount Broker believes that to encourage more investors, there is a need to offer more tax-sops, especially for long term capital gains (LTCG).

FULL COVERAGE:  Union Budget 2026

"Currently, LTCG up to Rs 1 lakh per financial year are tax free, and 10% tax is charged on LTCG in excess of Rs 1 lakh. This tax-free limit needs to be enhanced to Rs 5 lakh. The Securities Transaction Tax (STT) was introduced in lieu of removing tax on LTCG. But now investors pay both STT and LTCG on equity transactions. This issue also needs to be addressed," added Jain.

Abhinav Tiwari, Research Analyst at Bonanza does not expect any meaningful changes to STCG, LTCG, or the STT on equities in Budget FY27.

"Given the government’s emphasis on fiscal discipline and revenue stability, we believe major rate cuts are unlikely. Any policy action is more likely to focus on rationalisation or clarification rather than outright tax reductions, and STT is also unlikely to see significant changes," added Tiwari.

Currently, STCG on listed equities is taxed at 20%, while LTCG is taxed at 12.5% on gains above Rs. 1 lakh, with the recently enhanced exemption threshold. STT continues to be levied on equity and derivative trades.

Narendra Solanki, Head Fundamental Research - Investment Services, Anand Rathi Shares and Stock Brokers also does not see any changes in the current tax regime.

Manish Chowdhury, Head of Research, StoxBox said there was a remote possibility for raising the tenure for calculating LTCG from one year to two years. The move would be aimed at addressing concerns relating to the increased short-sightedness by market participants. The increased tenure would help in cementing flows into the equity markets, especially from retail investors.

Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities does not expect any major change  in the equity taxation regime in the upcoming Budget.

Nitasha Shankar, Head Equity Strategy, Yes Securities India is of the view that capital market participation for retail investors has turned healthy in the past few years especially in the post COVID era.

"Any tweaks or increase in tax rates could be taken in a negative sense and can lead to panic/reduced participation," said Shankar.

Chirag Jain, CEO, Ashika Credit Capital feels with strong retail participation and capital markets becoming a key savings avenue, the government probably won’t risk unsettling sentiment in Bu8dget 2026.

Nandish Shah, AVP– PCG Research & Advisory, (Fundamental) Wealth Management, Motilal Oswal Financial Services said, "There is no expectation of any tinkering with long term capital gains tax, short term capital gains and STT. FY27 Budget is likely to see a tightrope walk between showing the intended fiscal consolidation and providing a push for capex growth, which we believe is the need of the hour."

Maulik Patel, Head of Research at Equirus Securities said, "STCG and LTCG taxes are likely to remain unchanged to preserve market stability. A rollback or reduction in STT is unlikely, given its steady revenue contribution and ease of collection and revenue from STT for FY26 is projected at Rs 78,000 crore and its significant contribution to govt revenue. Already govt has reduced GST rate in mid of FY26 to spur consumption demand and this has led to Rs 50,000 crore of revenue forgone."

Kamal Poddar, MD, Choice International is of the view that it is important to separate market hopes from fiscal reality. "Despite strong lobbying for a rollback—some voices even pushing for a 5 per cent LTCG rate—the probability of meaningful relief in Budget 2026 is low. The government remains committed to fiscal consolidation, and with limited revenue headroom, a tax cut on capital gains is difficult to justify politically and economically," said Poddar. 

Abhinav Tiwari, Research Analyst at Bonanza said, "At this stage, we do not expect any meaningful changes to STCG, LTCG, or the STT on equities in Budget FY27. Given the government’s emphasis on fiscal discipline and revenue stability, we believe major rate cuts are unlikely. Any policy action is more likely to focus on rationalization or clarification rather than outright tax reductions, and STT is also unlikely to see significant changes."