On Budget Day 2026, there was no announcement of any cut in Long-Term Capital Gains (LTCG) tax or Short-Term Capital Gains (STCG) tax on equities.
While there had been market expectations of some relief for investors, Finance Minister Nirmala Sitharaman did not reduce capital gains tax rates in the Union Budget 2026. Existing tax structures for equity investments remain unchanged.
No relief on LTCG and STCG
- LTCG tax on equity investments continues at the existing rate
- STCG tax on equity investments also remains unchanged at current levels.
There was no modification to holding periods, exemption limits, or tax rates related to capital gains in the Budget speech or accompanying proposals.
STT increased instead
Contrary to expectations of tax relief, the government announced an increase in Securities Transaction Tax (STT) on futures trading.
- STT on futures has been raised from 0.02% to 0.05%.
This effectively increases transaction costs for derivatives traders and has had an immediate impact on broking stocks, exchanges, and capital market intermediaries.
What this means for investors
The absence of any LTCG or STCG cut indicates that the government has chosen to prioritise revenue stability and market discipline over investor tax relief in Union Budget 2026. By increasing STT, the focus appears to be on curbing excessive leveraged and high-frequency trading activity in the derivatives segment rather than incentivising short-term market participation.
Bottom line
- No cut in LTCG
- No cut in STCG
- STT increased, especially impacting F&O traders
Markets reacted accordingly, with selling pressure seen in broking and exchange-linked stocks on Budget Day.
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