Kicking off its recommendations for the Union Budget 2027, the Federation of Indian Chambers of Commerce and Industry (FICCI) has urged the Finance Ministry to bring back the long-term capital gains (LTCG) tax exemption on listed equities. India Inc has also called for a stable 10-year capital gains tax regime, changes to tax rules for foreign investors and the removal of certain tax deduction at source (TDS) requirements in the Budget.
In its Budget recommendations, FICCI argued that the reintroduction of the LTCG tax in 2018, without withdrawing the securities transaction tax (STT) on listed shares, has resulted in a dual levy on equities.It has also flagged the increase in short-term capital gains (STCG) tax to 20% and LTCG tax to 12.5% from July 23, 2024, with an exemption threshold of Rs 1.25 lakh.
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The industry body further cited foreign portfolio investor withdrawals of around Rs 3.08 lakh crore during the year and said higher capital gains tax, and the absence of forex adjustment have eroded equity returns post tax.
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FICCI has, as a result, proposed restoring the LTCG exemption on said listed securities. If required to protect revenue, the government could appropriately increase STT on delivery-based transactions, it added. It has also sought a commitment to maintain the capital gains tax framework for around 10 years.
Additionally, for foreign investors, FICCI has proposed allowing capital gains to be calculated in the original foreign currency in which the investment was actually made. This would then account for rupee depreciation while calculating taxable gains. India Inc also seeks protection for commercial transactions from anti-abuse tax provisions. FICCI says it wants a specified list of investors and transactions that are exempt from provisions that can result in taxation of marginal income, intra-group transfers and acquisitions.
On the topic of mergers, teh industry body has asked the Finance Ministry to make the carry-forward and set-off of accumulated business losses and unabsorbed depreciation available across all sectors. It has also suggested safeguards based on business continuity, and payroll costs.
The industry body also wants the government to scrap the 0.1% TDS on qualifying business-to-business purchases of goods and e-commerce transactions where payments are GST-liable and suppliers are GST-registered. It said these transactions are already captured through GST and other digital reporting systems, while TDS creates working-capital blockages and reconciliation work.
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