Aam Aadmi Party (AAP) Rajya Sabha MP Raghav Chadha has urged the Union government to abolish Long-Term Capital Gains Tax (LTCG) on equity investments made by individual investors, arguing that the current tax regime discourages genuine participation in capital markets. His demand follows the Finance Minister Nirmala Sitharaman’s announcement of a sharp increase in Securities Transaction Tax (STT) on derivatives trading in the Union Budget 2026–27.
Participating in the Budget debate in the Rajya Sabha, Chadha welcomed the government’s decision to raise STT on futures and options (F&O) transactions, stating that higher transaction costs could act as a deterrent against excessive and reckless speculation in the derivatives market. However, he stressed that the simultaneous levy of STT and LTCG on equity investments places an undue burden on long-term investors.
STT Hike in Budget 2026–27
In the Budget presented on February 1, 2026, the Finance Minister proposed a steep increase in STT rates on derivatives trading. As per the proposals:
- STT on futures transactions has been increased by 150%, from 0.02% to 0.05%.
- STT on options transactions has been raised by 50%, from 0.01% to 0.15%.
The government has justified the hike as a measure to curb excessive speculation and protect retail investors, particularly in the derivatives segment.
Chadha Supports STT on Derivatives, Flags Retail Losses
Chadha supported the STT hike on F&O trades, citing data that suggests nearly 90% of retail investors incur losses in derivatives trading. He described unchecked F&O activity as turning stock markets into a form of gambling rather than a platform for long-term wealth creation.
“I welcome the hike in STT on derivatives as it can curb reckless speculation. Nearly 90% of retail investors lose money in F&O,” Chadha said during his speech in the Upper House.
Demand to Remove LTCG on Equities
At the same time, Chadha questioned the rationale of continuing LTCG on equities when STT is already being collected on every transaction. He recalled that when STT was first introduced in 2004 by then Finance Minister P. Chidambaram, LTCG on listed equities was nil. STT was positioned as a replacement mechanism to simplify taxation and curb tax evasion in stock market transactions.
“Originally, when STT was introduced, LTCG was zero. Today, investors are paying both STT and LTCG. This double burden discourages long-term investing,” Chadha argued.
In a post on social media platform X, accompanied by a video of his Rajya Sabha speech on Monday, February 9, Chadha reiterated his demand:
“My demand: Make Long-Term Capital Gains Tax on equities NIL for individual investors.”
Global Comparisons and Economic Rationale
Chadha pointed out that several global financial hubs, including Switzerland, Singapore, and the United Arab Emirates, do not impose capital gains tax on equity investments for individuals. He argued that aligning India’s tax policy with such jurisdictions would make Indian capital markets more attractive and investor-friendly.
According to him, abolishing LTCG on equities could have multiple benefits—boosting household wealth, discouraging speculative trading, and redirecting household savings away from unproductive assets like gold and real estate toward equities, which support economic growth and corporate financing.
What is Securities Transaction Tax?
Securities Transaction Tax (STT) is a direct tax levied by the central government on the purchase and sale of securities executed through recognised stock exchanges. It applies to equity shares, futures, and options, and is collected at the time of the transaction itself, irrespective of whether the investor ultimately makes a profit or a loss.
With the Budget 2026–27 proposing a significant increase in STT on derivatives, Chadha’s call to abolish LTCG on equities has reignited the debate on whether India’s capital gains tax framework truly incentivises long-term, responsible investing or inadvertently penalises it.
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