FICCI makes recommendations to FM ahead of Budget 2027-28, highlights LTCG exemption, TDS relief and faster tax appeals

Industry body FICCI has pressed the government to restore the long-term capital gains (LTCG) tax exemption on listed shares in the Union Budget 2027-28, while also seeking lighter TDS rules, faster tax appeals and clearer taxation of foreign firms.

In its recommendations to Finance Minister Nirmala Sitharaman, the chamber pointed out that foreign portfolio investors (FPIs) have withdrawn about Rs 3.08 lakh crore during the year. It said capital gains tax, charged on top of the securities transaction tax (STT), eats into returns from equities, and needs a review to make India a more attractive place to invest.

Also read: We will consider the call for review of LTCG tax: Finance minister Nirmala Sitharaman


To protect revenue, FICCI said, the government can raise STT on delivery-based trades if needed. Once the new regime is in place, it should be kept for a long period, say 10 years, so that investors have certainty, the chamber added.

Key recommendations

• Restore the LTCG exemption on listed securities and, if needed, raise STT on delivery-based trades to protect revenue.
• Exempt B2B payments to GST-registered suppliers from the 0.1 per cent TDS on purchase of goods and e-commerce transactions.
• Drop routine TDS and TCS certificates where credits already show up electronically.
• Fill vacancies in the tax appeals system, and give a full stay of demand and interest waiver if an appeal is pending beyond two years for reasons not linked to the taxpayer.
• Set up a "White List" of investors and transactions exempt from the deeming rules on transfers below fair market value.
• Allow carry forward of losses on mergers in all sectors, not just specified ones.
• Replace the Significant Economic Presence (SEP) rule with an Automated Digital Services rule aligned with the UN Model, and cut the proposed 30 per cent presumptive profit rate for digital businesses to 5 to 10 per cent of gross revenue.
• Keep the old definition of "Associated Enterprise" in the new Income-tax Act.
• Finalise provisional customs assessments automatically after two years, and refer fewer cases to the Special Valuation Branch.

Double levy on equity gains

FICCI said LTCG tax was brought back in 2018 without withdrawing STT, which has led to a double levy. It also said there is no adjustment for the fall in the rupee, so foreign investors are taxed on unrealised gains.

Since July 23, 2024, short-term gains on listed equity are taxed at 20 per cent and long-term gains at 12.5 per cent, with an LTCG exemption limit of Rs 1.25 lakh. FICCI said higher capital gains tax, continued STT and no forex adjustment together eat into post-tax returns from equities. Without prejudice to its main demand, it has also asked that foreign investors be allowed to work out capital gains in the foreign currency in which they first invested.

Lighter TDS burden

On TDS, FICCI wants B2B payments that attract GST and are made to GST-registered suppliers exempted from the 0.1 per cent TDS on purchase of goods and e-commerce transactions. It said these transactions are already captured through GST and other digital reporting, while TDS blocks working capital and forces businesses to reconcile their books, GST and TDS returns.

A FICCI survey found TDS mismatches between returns, Form 26AS/AIS and books of account for 70 per cent of groups and 49 per cent of single entities. The chamber wants PAN-level and invoice-level details in TDS statements and tax-credit records, and a downloadable tool to reconcile TDS returns with books. It also wants routine TDS and TCS certificates dropped where credits already show up electronically, while keeping them for salaried employees, people without PAN, non-residents who need foreign tax credit and anyone who asks for one.

Backlog in tax appeals

A FICCI survey also found that over 50 per cent of respondents had appeals pending for more than two years. About 63 per cent faced difficulty in getting rectifications, and nearly 60 per cent reported delays in getting Orders Giving Effect (OGEs).

FICCI said the Central Action Plan 2026-27 itself recognises 45 to 50 per cent vacancies at the Commissioner (Appeals) and Joint Commissioner (Appeals) level. It wants vacancies filled through promotions and transfers, a dedicated Faceless CCIT (Appeals) cadre for old and high-demand cases, and monthly data on performance against Action Plan targets. Where an appeal stays pending beyond two years for reasons not linked to the taxpayer, it wants a full stay of demand, a halt to refund recovery and a waiver of interest for the delay.

The chamber also wants stay orders digitised and shared in real time, so that stayed demands are not adjusted against refunds. Other asks include raising the upload limit on the tax portal from 5 MB to at least 50 MB and issuing notices on specific issues, without repeated information requests.

Mergers, losses and foreign firms

FICCI has sought a "White List" of investors and transactions exempt from the deeming provisions on transfers made below fair market value (sections 79 and 92(2)(m) of the Income-tax Act, 2025). The list would cover sovereign investors, pension funds, banks, insurers, Category I FPIs, listed companies, SEBI takeover code acquisitions, intra-group transfers and transfers under NCLT-approved insolvency plans. FICCI said these provisions may tax notional income even in genuine deals, and a gap between signing and closing of a deal can cause big valuation differences when listed share prices rise. It also wants a 10 per cent tolerance for valuation differences.

It wants the carry forward of losses on mergers, now limited to specified sectors under Section 116, opened to all sectors with safeguards based on business continuity, employee headcount or payroll. FICCI said the UK, Singapore, Hong Kong and China allow loss transfers subject to business and ownership continuity and anti-abuse safeguards.

FICCI also wants the "Associated Enterprise" definition of the 1961 Act retained in Section 162 of the 2025 Act, as the Parliamentary Select Committee had recommended. It said the new wording treats specified transactions as enough to trigger deemed associated-enterprise status, which may pull ordinary deals such as independent lending and contract manufacturing into transfer pricing.

For foreign companies, FICCI said changing laws, treaty terms and differing court rulings make it hard to decide whether a permanent establishment exists in India and how much profit to attribute to it. It has asked for:

• A wider optional presumptive tax scheme for non-residents, as proposed in a NITI Aayog paper dated October 3, 2025;
• A uniform 10 per cent presumptive profit rate on gross contract value for supply and installation of telecom and technology equipment;
• A cut in the proposed 30 per cent presumptive profit rate for digital and e-commerce businesses to 5 to 10 per cent of gross revenue, in line with the earlier Equalisation Levy; and
• Scrapping of the Significant Economic Presence (SEP) rule, which it said was meant for digital businesses but also covers regular sales of goods and services. At the least, it said, imports of physical goods should be excluded.

Customs proposals

FICCI said provisional assessments of imports stay pending despite the two-year timeline in Section 18 of the Customs Act, as there is no effective monitoring. It wants automatic finalisation if a case is unresolved beyond two years, and a move towards risk-based valuation, with Special Valuation Branch referrals limited to cases that need a detailed check. It has also asked for a single searchable portal for all trade notices and customs instructions, with the status of each notice shown.

The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from April 1, 2026, according to a CBDT release. The Income-tax Rules, 2026 were notified on March 20, 2026. The first version of the Bill was withdrawn in August 2025 after a 31-member Select Committee headed by BJP MP Baijayant Panda suggested changes, according to an ANI report. Parliament passed the revised Act on August 12, 2025.

Also read: FM Sitharaman acknowledges foreign investor anxiety, says she will consider voices seeking tax changes before Budget

LTCG on listed shares was exempted in 2004, when STT was introduced. Budget 2018 brought LTCG tax back at 10 per cent on gains above Rs 1 lakh, and STT stayed. Budget 2024-25, presented on July 23, 2024, raised the short-term rate from 15 to 20 per cent, the long-term rate from 10 to 12.5 per cent and the exemption limit from Rs 1 lakh to Rs 1.25 lakh. India also scrapped the 2 per cent Equalisation Levy on e-commerce supplies from August 1, 2024, and the 6 per cent levy on online advertising from April 1, 2025.

FICCI had also sought exemption of GST-reported B2B payments from TDS ahead of Budget 2026-27, according to an ANI report from October 2025.

Budget 2027-28 is likely to be presented on February 1, 2027, according to a PTI report. The report said the Budget will come against the backdrop of the West Asia crisis, high crude oil prices and slower global growth.