They also suggested that the government avoid further increases in transaction taxes.
The Union Budget will be presented by Finance Minister Nirmala Sitharaman on February 1.
Market stakeholders also demanded enhancement of the tax-free exemption limit on long-term capital gains (LTCG) from equity investments to provide greater relief to retail and long-term investors.
In its budget wishlist, JM Financial Services recommended that the government should raise the tax-free exemption limit for equity LTCG from Rs 1.25 lakh to Rs 2 lakh.
The firm also sought to standardise the definition of “long term” to 12 months across all asset classes, including equity, debt, gold and real estate, to reduce complexity and improve tax clarity.
Additionally, it called for allowing capital losses to be set off against income under other heads.Market participants have also cautioned against any further increase in transaction-related taxes.
Dhiraj Relli, Managing Director and Chief Executive Officer of HDFC Securities, said stakeholders have proposed keeping the Securities Transaction Tax (STT) on cash equity trades lower than that on derivatives to encourage long-term investing over speculative trading.
He also suggested taxing only the profit component of share buybacks and aligning dividend tax rates for domestic investors with those applicable to non-resident Indians (NRIs).
Tejas Khoday, Chief Executive Officer of FYERS, said the government should refrain from raising STT any further.
He added that reducing both long-term and short-term capital gains tax to 10 per cent would significantly boost retail investor participation.
Khoday also expressed hope that import duties on gold and silver are not increased further, as these assets remain important hedging instruments against equity market volatility and rupee depreciation.
Meanwhile, the NSE and BSE will conduct live trading on Sunday, February 1, when the Union Budget is presented.
