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An industry body has urged the government to abolish long-term capital gains (LTCG) tax on equity investments, reduce short-term capital gains (STCG) tax from 20% to 10% and lower securities transaction tax (STT) rates in its pre-Budget recommendations submitted to Finance Minister Nirmala Sitharaman on November 10.
The industry body said rationalising capital market taxation would encourage long-term investments and improve India's competitiveness as an investment destination. The recommendations are part of the PHD Chamber of Commerce and Industry’s (PHDCCI) submission ahead of the Union Budget 2027-28.
The proposals come alongside a broader push by the industry body to improve access to equity financing for businesses, particularly micro, small and medium enterprises (MSMEs).
"We believe that ease of access to credit, equity support, rationalisation of taxation and strong implementation of Government schemes will foster faster growth of Indian industry as a global manufacturing hub," Ranjeet Mehta, Secretary General and Chief Executive Officer, PHDCCI, said.
Push for greater equity financing for MSMEs
PHDCCI has also called for direct government equity investment in MSMEs through the Fund of Funds Scheme, with dedicated allocations for start-up seed capital and participation in small and medium enterprise (SME) initial public offerings (IPOs).
The proposal seeks to expand financing options for smaller businesses beyond conventional bank credit.
The industry body has also recommended strengthening the implementation of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to ensure effective collateral-free lending. It has called for stricter compliance by banks and a centralised portal to track loan applications and monitor reasons for rejection.
PHDCCI President Anil Gupta acknowledged the government's initiatives to strengthen the industrial and MSME ecosystem, particularly through improved access to finance, credit guarantees, equity funding and resolution of delayed payments.
"To strengthen India’s MSME ecosystem further, PHDCCI recommends the change in classification of non-performing assets (NPA), enhancement of PM MUDRA Loan Limits, strengthening CGTMSE Implementation and Direct Equity Support," Gupta said.
Higher MUDRA limits among other demands
The chamber has also sought an increase in loan ceilings under the Pradhan Mantri MUDRA Yojana (PMMY), proposing limits of Rs 1 lakh under Shishu, Rs 10 lakh under Kishore and Rs 20 lakh under Tarun and Tarun Plus categories.
Another key recommendation is to extend the overdue period for classifying MSME loans as non-performing assets from 90 days to 180 days, citing longer working capital cycles and delays in realisation of receivables.
MSMEs contribute about 31% to India's gross domestic product, account for 48.58% of total exports and generate around 35.4% of manufacturing output. The sector comprises more than 7.47 crore enterprises and provides livelihoods to approximately 32.8 crore people.
The recommendations form part of the chamber's broader pre-Budget proposals aimed at strengthening access to finance, equity investment and the competitiveness of Indian industry.
