The number of stock market investors and traders have increased multifold times in 2025 compared to the year 2018. This was driven by a few critical factors like a variety of discount brokerage plans offered by a lot of new-age fintech companies, slick trading platforms, explosion of smartphone usage, and cheap mobile data. However, there have been a few pain points for investors and traders.

The government has raised Securities Transaction Tax (STT) along with higher Short-term Capital Gain Tax (STCG) and Long-term Capital Gain Tax (LTCG) in the past few years. This has weighed on traders who were active in the derivatives segment and also on investors who would like to book profits within a year of their investments. Let us look at the expectations from investor community from the budget 2026.

Capital markets

Several industry bodies related to the financial market and stakeholders are hoping the government would consider lowering the STT in the upcoming union budget 2026. They are of the opinion that lowering the STT could lower transaction costs for both retail and institutional investors. Lower STT will also encourage long-term investing and attract more Foreign Institutional Investors (FIIs), improving overall investor sentiments.

STT is the tax that is imposed by the government on traders and investors who buy and sell stocks and derivatives products on Indian stock exchanges. This tax is also levied on equity-oriented mutual fund units.

Mutual funds

AMFI is seeking the government to lower LTCG to encourage long-term investing.They also want the centre to increase the zero-tax exemption from 1.25 lakhs to threshold to ₹2 lakhs. Further, any capital gains realized from selling equity mutual fund schemes that are held for more than five years must be completely tax free.

AMFI has also suggested bringing back long-term capital gains (LTCG) tax with indexation for debt mutual fund schemes which is held for more than three years. If the government does it, then it would be beneficial for higher income investors because right now any gains realized from most debt mutual funds are taxed at income tax slab rates irrespective of the holding period. It is also expected to make debt mutual funds attractive to a lot of investors and lead to higher inflows into these schemes.

The industry body has also put forward a suggestion to launch a new scheme called Debt Linked Savings Scheme (DLSS), similar to Equity Linked Savings Schemes (ELSS). This DLSS is expected to have a five year lock-in period and separate tax exemption beyond the current permissible limit under Section 80C. The aim of this scheme is to invest a minimum of 80 percent of the funds into debt investments that are considered safe and to give long-term retail investors a tax-efficient way to invest in fixed income financial instruments.

Further, AMFI has suggested that AMCs should be allowed to start retirement plans with tax benefits that will provide pensions, similar to the National Pension System. They have also recommended creating a Mutual Fund–Voluntary Retirement Account to provide more savings options for retirees and to promote investing for the long haul using such mutual fund products.

Conclusion 

As the investor community continues to expand, industry leaders and investors want the government to create conducive policies that would improve access, affordability and long-term value creation. The above proposals, if implemented, would make long-term investment more inclusive, attract global capital, deepen market participation and boost investor confidence.