New Delhi: The PHD Chamber of Commerce and Industry (PHDCCI) has urged the government to abolish long-term capital gains (LTCG) tax on equity investments and reduce short-term capital gains (STCG) tax from 20 per cent to 10 per cent as part of its recommendations for the Union Budget 2027-28.
The industry body submitted its pre-Budget recommendations during a leadership meeting with Union Finance Minister Nirmala Sitharaman, seeking reforms to encourage investment in capital markets and improve access to finance for micro, small and medium enterprises (MSMEs).
In its recommendations, PHDCCI proposed the "abolition of LTCG tax on equity investments, reduction of STCG tax from 20% to 10%, and lowering of STT rates" to encourage long-term investment and improve India's capital market competitiveness.
At present, long-term capital gains exceeding Rs 1.25 lakh from eligible equity investments are taxed at 12.5 per cent, while short-term capital gains attract a tax of 20 per cent.
Apart from changes in capital market taxation, the chamber recommended relaxing loan repayment norms for MSMEs by extending the overdue period for classifying loans as non-performing assets (NPAs) from the existing 90 days to 180 days.
According to PHDCCI, the proposed change would help smaller businesses manage longer working capital cycles and delays in receiving 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," said Anil Gupta, President, PHDCCI.
The chamber also sought higher loan limits under the Pradhan Mantri MUDRA Yojana (PMMY), proposing ceilings of Rs 1 lakh under Shishu, Rs 10 lakh under Kishore. It also sought a Rs 20 lakh ceiling for Tarun/Tarun Plus, although loans of up to Rs 20 lakh are already available under the existing Tarun Plus category.
According to the Department of Financial Services (DFS), the existing Pradhan Mantri MUDRA Yojana provides collateral-free loans of up to Rs 50,000 under Shishu, Rs 5 lakh under Kishore and Rs 10 lakh under Tarun.
The Tarun Plus category already offers loans of up to Rs 20 lakh to borrowers who have successfully repaid earlier Tarun loans. Separately, under the CGTMSE scheme, eligible credit facilities of up to Rs 10 crore can receive guarantee coverage, with the ceiling increased from Rs 5 crore effective April 1, 2025.
It further recommended direct government equity investment in MSMEs through the Fund of Funds Scheme, with dedicated allocations for start-up seed capital and participation in SME initial public offerings (IPOs).
To improve collateral-free lending, PHDCCI called for stricter compliance by banks under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and a centralised portal to track loan applications and reasons for rejection.
Highlighting the sector's economic importance, the chamber said MSMEs contribute around 31 per cent to India's GDP, account for 48.58 per cent of exports and provide livelihoods to approximately 32.8 crore people.
"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," said Dr Ranjeet Mehta, Secretary General and CEO, PHDCCI.
The industry body submitted its pre-Budget recommendations during a leadership meeting with Union Finance Minister Nirmala Sitharaman, seeking reforms to encourage investment in capital markets and improve access to finance for micro, small and medium enterprises (MSMEs).
In its recommendations, PHDCCI proposed the "abolition of LTCG tax on equity investments, reduction of STCG tax from 20% to 10%, and lowering of STT rates" to encourage long-term investment and improve India's capital market competitiveness.
At present, long-term capital gains exceeding Rs 1.25 lakh from eligible equity investments are taxed at 12.5 per cent, while short-term capital gains attract a tax of 20 per cent.
Apart from changes in capital market taxation, the chamber recommended relaxing loan repayment norms for MSMEs by extending the overdue period for classifying loans as non-performing assets (NPAs) from the existing 90 days to 180 days.
According to PHDCCI, the proposed change would help smaller businesses manage longer working capital cycles and delays in receiving 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," said Anil Gupta, President, PHDCCI.
The chamber also sought higher loan limits under the Pradhan Mantri MUDRA Yojana (PMMY), proposing ceilings of Rs 1 lakh under Shishu, Rs 10 lakh under Kishore. It also sought a Rs 20 lakh ceiling for Tarun/Tarun Plus, although loans of up to Rs 20 lakh are already available under the existing Tarun Plus category.
According to the Department of Financial Services (DFS), the existing Pradhan Mantri MUDRA Yojana provides collateral-free loans of up to Rs 50,000 under Shishu, Rs 5 lakh under Kishore and Rs 10 lakh under Tarun.
The Tarun Plus category already offers loans of up to Rs 20 lakh to borrowers who have successfully repaid earlier Tarun loans. Separately, under the CGTMSE scheme, eligible credit facilities of up to Rs 10 crore can receive guarantee coverage, with the ceiling increased from Rs 5 crore effective April 1, 2025.
It further recommended direct government equity investment in MSMEs through the Fund of Funds Scheme, with dedicated allocations for start-up seed capital and participation in SME initial public offerings (IPOs).
To improve collateral-free lending, PHDCCI called for stricter compliance by banks under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and a centralised portal to track loan applications and reasons for rejection.
Highlighting the sector's economic importance, the chamber said MSMEs contribute around 31 per cent to India's GDP, account for 48.58 per cent of exports and provide livelihoods to approximately 32.8 crore people.
"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," said Dr Ranjeet Mehta, Secretary General and CEO, PHDCCI.