Investors have 3 big expectations from Budget 2026: Profit up to ₹ 2 lakh can be tax free; Suggestion to reduce transaction tax and STCG

Before the Union Budget 2026 to be presented next month, stock market investors and experts have put forward a list of their demands before the government. Market experts say that to encourage retail investors, the tax exemption limit on Long Term Capital Gains (LTCG) should be increased.

At present, there is no tax on profits up to Rs 1.25 lakh in a year, which has been suggested to be increased to Rs 2 lakh. Additionally, investors are also concerned about higher rates of Securities Transaction Tax (STT) and Short Term Capital Gains (STCG). The market believes that reducing the tax on transactions will increase liquidity and more and more people will be able to join the stock market.

Emphasis on increasing the tax exemption limit

Market participants say that the number of retail investors in the stock market has increased rapidly in the last few years. In such a situation, the current LTCG exemption limit of Rs 1.25 lakh is quite low. Experts suggest that it should be increased to at least Rs 2 lakh. They argue that this will give middle class investors better returns on their portfolio and will motivate them to invest for the long term.

Demand to reduce STT

STT rates on Futures and Options (F&O) were increased in the last budget. Brokerage houses and traders say that due to high transaction tax, the cost of trading has increased, which is directly impacting the market volume. Investors are demanding that STT rates on purchases made in the cash market should be kept low so that investment is encouraged instead of speculation.

Expected change in holding period

At present, the definition of ‘long term’ is different for different asset classes like equity, debt, gold and real estate. In Budget 2026, it is expected that the government may set a uniform holding period of 12 months for all assets to simplify this. This will make tax calculation easier and there will be no confusion among investors.

get the benefit of indexation again

There is resentment among investors after the removal of indexation benefits from assets like real estate and gold. Market experts want the government to at least reintroduce the benefit of indexation on non-financial assets or reduce the tax rate from 12.5% ​​to 10%. This will provide relief to long term investors in proportion to inflation.

Economy will benefit if investment increases

Tax experts say that if the government liberalizes the capital gains tax structure, it will increase the flow of domestic savings towards the stock market. Amid selling by foreign investors (FPIs), money from domestic investors can strengthen the market. The challenge for the government will be to strike a balance between revenue and investors’ expectations.

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