Will LTCG Tax Change in Budget 2027? The Proposals, Today's Exemptions, and the History of LTCG Tax in India

Few taxes have changed shape as often as the tax on long-term gains from shares. It was abolished in 2004, brought back in 2018 and raised in 2024, and now, with foreign investors selling and markets flat, there is talk of cutting it again in the Budget due in February 2027. This guide separates what is law from what is being proposed, and shows what each idea would mean for an ordinary investor.

Written on 3 November 2026. The law quoted is the Income-tax Act, 2025, which applies from 1 April 2026. The proposals are recommendations, not law: SEBI's has not been published and is known from a Reuters report, and SBI Research's latest note is known from press reports until SBI posts it. Nothing here predicts the Budget, and nothing here is a recommendation to buy, hold or sell any investment.

The tax as it stands

Three rules inside section 198 matter to a small investor. A resident whose other income is below the basic exemption limit can use the unused part of that limit against the gain (198(3)). Deductions such as those for insurance or the NPS cannot be set against these gains (198(6)). And the rebate under section 156, which makes income up to ₹12 lakh tax-free in the new regime, is given on the tax on your other income, not on the tax on these gains (198(7)).

The exemptions and reliefs you can use now

The history, from zero to 12.5%

What is on the table for the next Budget

The case for and against

What the proposals would mean for an investor

Take an investor with ₹3 lakh of long-term gains in a year on listed shares and equity funds, and no other relief. The figures are tax before surcharge and cess.

Two facts are worth keeping in mind while the debate runs. A change comes only through the Finance Bill, usually presented on 1 February, and it can apply from the day of the speech, as the 2024 rates did. And the tax is due only when you sell: a gain you hold is not taxed, whatever the rate becomes. Switching from one mutual fund scheme to another is a sale.

Frequently Asked Questions

Will LTCG tax be abolished in Budget 2027? No one outside the government knows. SEBI and SBI Research have proposed relief, but the government told the Lok Sabha in July 2026 that it had no proposal to scrap the tax. The answer will be in the Finance Bill.

How much long-term gain is tax-free each year? ₹1.25 lakh in a tax year, on listed shares, equity-oriented fund units and business trust units together. Tax at 12.5% applies only to the gains above it.

When does a share or an equity fund unit become long-term? When it has been held for more than 12 months. Each purchase, including each SIP instalment, has its own holding period.

Do foreign investors pay less LTCG than residents? Not on shares: the rate is the same 12.5%. The exemption granted from 1 April 2026 covers only foreign investors' interest and gains on government securities.

Can the ₹12 lakh rebate cover my LTCG tax? No. Under section 198(7) the rebate under section 156 is allowed only on the tax on your other income. A resident with low other income can, however, use the unused basic exemption limit against the gain.

Is there still any benefit for shares bought before 2018? Yes. The cost of shares and equity fund units bought before 1 February 2018 can be stepped up to their 31 January 2018 price, capped at the sale price, under section 90(7).

If the tax is cut, would it apply to sales made before the Budget? Normally not. A change applies from the date the Finance Bill sets. In 2024 the new rates applied to transfers on or after Budget day, 23 July.