Abolish LTCG, rationalise STCG, STT rates on equities: PHDCCI to Finance Ministry

PHDCCI Seeks Overhaul of Equity Taxes

Industry chamber PHDCCI has approached the Finance Ministry with a set of recommendations aimed at reworking the tax treatment of equity investments. Its central demand is the removal of the Long Term Capital Gains tax, alongside a rationalisation of both Short Term Capital Gains tax and Securities Transaction Tax on equities.

The chamber has also proposed extending the holding period that qualifies an investment as long-term. In its view, a longer threshold would draw in genuine, patient investors rather than those seeking short-term gains, and would make the regime more attractive for those committing capital over sustained periods.

Why The Proposal Matters

For businesses and market participants, the recommendations touch on the effective cost of investing in Indian equities. PHDCCI contends that the present structure results in double taxation on equities, which it says discourages investment activity. Any reduction in LTCG, STCG or STT would directly alter post-tax returns and could influence how companies, promoters and institutional players structure their holdings.

The chamber has linked its pitch to the behaviour of Foreign Portfolio Investors, noting that they have pulled out substantial sums from Indian equities, with a consequent impact on overall investment levels. FPIs are sensitive to tax incidence and compliance costs, so the treatment of capital gains and transaction taxes features prominently in their allocation decisions.

The reference to STT is significant for compliance teams. STT is levied at the point of transaction and is collected through trading platforms, making it a recurring cost embedded in every trade rather than a charge assessed at the end of a holding period. Changes to it would therefore affect transaction-level economics across the board.

What To Watch Next

The Finance Ministry is expected to examine the suggestions, and the government's assessment could translate into revisions to tax …