# STT and bond tax relief under review

> Government considers scrapping STT and bond tax relief to boost market sentiment.
- Title: STT and bond tax relief under review · Financialexpress
- Summary: Government considers scrapping STT and bond tax relief to boost market sentiment. India's government is reviewing capital market tax reforms including STT…
- Keywords: stt, bond tax relief, capital market tax, fpi, ltcg, equity market, corporate bonds, tax concessions, fiscal policy, market sentiment, Financialexpress
- Source: Financialexpress — https://financialexpress.com/market/capital-market-tax-review-stt-scrapping-bond-tax-relief-on-the-table-4377370
- Author: Prasanta Sahu
- Published: 2026-11-05T00:36:31+00:00
- Read time: 2 min
- Topics: stt, bond tax relief, capital market tax, fpi, ltcg, equity market, corporate bonds, tax concessions, fiscal policy, market sentiment, business, money
## Capital market tax review underway
The Centre is revisiting capital market taxation to boost investor sentiment by considering options including scrapping STT and tax concessions on corporate bond interest.
## LTCG tax structure under consideration
The government is examining a tiered long-term capital gains tax structure with lower rates for longer holding periods and possible exemptions after three to five years.
## LTCG tax currently at 12.5%
Equities with holdings over 12 months face a 12.5% tax on long-term capital gains without indexation benefits.
## FPI tax relief options
The government is considering providing relief exclusively to foreign portfolio investors, extending it to all investors, or focusing on debt markets instead.
## STT revenue growth
STT collections rose 51.6% year-on-year to `46,840 crore by October 14, 2026, with projections for `73,700 crore in FY27.
## STT rates in effect
Effective April 1, 2026, STT rates were 0.1% on equity delivery, 0.025% on intra-day sales, 0.05% on futures, 0.15% on options premium and exercised options.
## Tax exemptions for FPIs
Foreign investors previously received exemptions from 30% short-term capital gains tax, 12.5% LTCG tax, and 20% interest income tax in government securities.
## Debt market focus
The government is exploring extending G-Sec tax exemptions for foreign investors to domestic investors in corporate bonds or offering concessional tax rates on bond interest.
## LTCG tax relief concerns
Lower LTCG tax rates could encourage investors to focus on high-growth stocks, potentially reducing dividend income and increasing tax revenue impact.
## STT elimination rationale
Former CBDT member Arbind Modi stated STT should have been eliminated when LTCG was reintroduced in 2018 as it was a revenue mobilisation measure.
## EY GPS perspective
EY GPS strategy lead partner Ajit Pai urged tax interventions to make Indian bonds more attractive to retail investors and promote bond market development.
## Next steps
The government plans to announce tax reforms in the upcoming FY27 Budget after a comprehensive market-sensitive review.
## Key takeaway

India's government is reviewing capital market tax reforms including STT abolition and corporate bond interest tax concessions to improve investor sentiment and market competitiveness.