LTCG Tax and STT: A Tweak or Removal? What Is Feasible? Ace Investors Shankar Sharma, Rohit Srivastava Say This

Few topics excite Indian investors as much as the LTCG tax and the Securities Transaction Tax. Both the LTCG tax and STT are paid on top of brokerage, and both have been raised in recent years. The headline asks whether the answer is a tweak or a removal and what is feasible.

This guide covers the current rules, what was said on 13 October 2026, the arguments for removal, the revenue the government would give up, the realistic options and what investors should do now. Figures that I work out are labelled, and unconfirmed claims are flagged.

One caution comes first: the market rose on the Finance Minister's remarks, but no official change has been announced, and the existing LTCG tax and STT provisions stay in force.

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LTCG Tax and STT: The Rules Today

Item	Current rule	Note
LTCG tax on listed equity and equity funds	12.5% on gains above Rs 1.25 lakh a year	Held more than 12 months; in force since 23 Jul 2024
Short-term capital gains tax	Generally 20%	Subject to conditions
STT on delivery equity	0.10% on the buy side and 0.10% on the sell side	Rs 100 on each side for a Rs 1 lakh trade
STT on intraday equity	0.025% on the sell side	Rs 25 for a Rs 1 lakh sale
STT on futures and options	Rates differ across reports	One report cites 0.05% for futures and 0.15% for options; others differ, so check the Finance Act
FPI treatment	Same 12.5% rate as domestic investors on equities	A separate FPI exemption from 1 Apr 2026 covers government securities only

As an example of the LTCG tax, a gain of Rs 3 lakh on shares held for over a year is taxed on Rs 1.75 lakh after the exemption, which gives Rs 21,875 of tax (my calculation). STT is paid on the transaction whether the trade makes a profit or a loss.

Risk: Rules for F&O STT are quoted differently in different reports, so use the official notification and not a news summary.

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What the Finance Minister Said on 13 October 2026

Point	Detail
Event	Bloomberg New Economy Forum, New Delhi
On LTCG tax	Open to hearing views on removal during Budget consultations
On STT	Called the debate on STT and treating asset classes similarly healthy
Commitment	None; she said it was too early because Budget preparations had begun
Capital flight	Said profit booking can cause a flight of capital and that retaining capital is not a unilateral thing
Rupee	The RBI may take further steps to curb excessive volatility
Market reaction	Sensex up about 1,109 points and the Nifty 50 above 22,700 on 13 Oct

One widely shared claim after the LTCG tax remarks says investor wealth rose by about Rs 1.7 lakh crore on the day, but I could not verify it. Several reports caution that her words should not be read as confirming tax relief.

Earlier, on 20 July 2026, a minister told the Lok Sabha in a written reply that there was no proposal under consideration to scrap the LTCG tax on equities. The two statements are consistent: the government is listening but has not moved.

Risk: Treating a listening exercise as a policy signal can lead to poor timing of sales or purchases.

The Case for Removing the LTCG Tax

Voice	Argument
SBI Research	Abolish the LTCG tax on equity and extend the holding period to two or three years to encourage long-term investing and attract foreign capital
Punit Shah, Dhruva Advisors	Supports rationalising taxes, possibly abolishing LTCG and shortening the holding period; notes STT was introduced in lieu of capital gains tax
A. Balasubramanian, Aditya Birla Sun Life AMC	Says removing LTCG for foreign investors would not hurt revenue much and would improve competitiveness
Shankar Sharma (July 2024)	Called LTCG and STT two unwelcome guests after the 2024 hike; this is a 2024 view and not a 14 October comment
Rohit Srivastava	I could not find a statement

On the LTCG tax debate, SBI Research puts foreign equity outflows at Rs 3.51 lakh crore from 2021 to September 2026. The same report's figures for 2025 and 2026 add up to more than that total, so the numbers are inconsistent and should be checked. Another update says foreign investors sold about 18 billion dollars of Indian equities so far in 2026 and bought 1.25 billion dollars in July.

The argument is that a lower LTCG tax would make Indian equities more attractive at a time when the rupee is weak. The counter-argument is that stock prices depend on earnings, growth, interest rates and global risk appetite, so a tax change alone may not reverse outflows.

Risk: Even supporters of removal accept that the LTCG tax is not the only reason foreign investors have sold.

Why the Government Is Cautious: The Revenue at Stake

Assessment year	LTCG collection	Note
AY 2024-25 (FY 2023-24)	Rs 72,249 crore
AY 2025-26 (FY 2024-25)	Rs 1,29,158 crore	About 79% higher (my calculation)
Two-year total	About Rs 2.01 lakh crore	Matches the sum of the two years

LTCG tax revenue rose sharply because of the equity rally in FY 2024-25, which makes the tax more important to the budget and a cut harder to justify. STT revenue figures were not available to me.

A removal of the LTCG tax would therefore carry a real cost, and the government has to weigh that against any gain in market flows. A smaller step is easier to fund than a full removal.

Risk: The fiscal cost of removing the LTCG tax is the main reason analysts expect caution.

Tweak or Removal: What Is Feasible?

Option	Who has argued for it	Revenue effect	My assessment of feasibility
Keep as is	Government position so far	None	Most likely before Budget 2027-28
Shorten the holding period	Punit Shah	Moderate	More feasible than removal
Raise the Rs 1.25 lakh exemption	Common investor demand	Small to moderate	Feasible and targeted at small investors
Cut the rate or remove it for foreign investors only	A. Balasubramanian	Depends on foreign share of gains	Possible, but unequal treatment is a challenge, since domestic and foreign rates are now equal
Abolish the LTCG tax and extend the holding period	SBI Research	Large	Least likely, given the Rs 1.29 lakh crore collection
Change or cut STT	Debated by the Finance Minister	Not available	Open question; STT rates for F&O are quoted differently

The last column is my assessment, not a forecast from any official or expert named above. The pattern is that the government has said it is listening, which suggests small, targeted changes are more likely than a full removal.

Risk: Any change would need an official announcement with rates and effective dates, and nothing like that has been made.

What Should Investors Do About the LTCG Tax Now?

1. Do not sell or buy only because of speculation about the LTCG tax or STT
2. Plan exits with the current 12.5% rate and Rs 1.25 lakh exemption in mind
3. Check the 12-month holding period before booking profits
4. Track the Budget 2027-28 consultations and any official notification
5. Keep trading costs, including STT and brokerage, in your return calculations

Conclusion

The LTCG tax and STT are under discussion, not under change. The Finance Minister is open to views, SBI Research and others want removal, and the revenue of Rs 1.29 lakh crore argues for caution, so a tweak looks more plausible than a full removal. This is my assessment and not advice.

Frequently Asked Questions

What is the LTCG tax on shares in India?

Ans. 12.5% on gains above Rs 1.25 lakh a year for listed equity and equity funds held more than 12 months, in force since 23 July 2024.

Will the LTCG tax be removed?

Ans. Not announced. The Finance Minister said on 13 October 2026 that she is open to hearing views, and an earlier Lok Sabha reply said no proposal was under consideration.

What is STT?

Ans. The Securities Transaction Tax, paid on trades in specified securities. On delivery equity it is 0.10% on both the buy and sell sides.

Why do experts want the LTCG tax removed?

Ans. SBI Research and others say it would encourage long-term investing and help attract foreign capital after large outflows.

How much does the government collect from the LTCG tax?

Ans. Rs 1,29,158 crore in AY 2025-26, up from Rs 72,249 crore a year earlier, about 79% higher (my calculation).

What did Shankar Sharma and Rohit Srivastava say?

Ans. I could not find their October 2026 views. Shankar Sharma criticised the 2024 hikes in LTCG and STT, and I found nothing from Rohit Srivastava.

What is the most feasible change?

Ans. In my assessment, small steps such as a shorter holding period or a higher exemption are more feasible than full removal. This is not a forecast.

Is this article investment or tax advice?

Ans. No. It is educational. Please check official notifications and consult a tax adviser.