Retail investors have demonstrated remarkable commitment to Indian markets despite facing multiple challenges including the pandemic, global rate shocks, and geopolitical turmoil. Their sustained engagement reflects a growing belief that Indian capital markets are maturing into a credible platform for long-term wealth creation. However, this confidence requires continuous reinforcement as investors' financial commitments expand annually.

Tax Structure Challenges in Global Context

India's capital market taxation faces significant competitiveness issues when viewed globally. The Securities Transaction Tax (STT) represents a key concern, as India remains among the few major equity markets imposing transaction-level taxes on every trade. This approach contrasts sharply with international practices:

STT creates a fundamental issue as it applies regardless of profitability, effectively becoming a tax on market participation itself. Recent years have seen STT increases to relatively high levels, making relief a priority for market sentiment improvement.

Commodity and Capital Gains Tax Concerns

The Commodities Transaction Tax (CTT), introduced in 2013 on non-agricultural commodities, has significantly impacted trading volumes. This undermines the objective of building deeper, more efficient commodity markets essential for supporting industrial users and infrastructure development.

Long-term Capital Gains (LTCG) tax presents another area requiring attention. India controversially reintroduced LTCG on listed equities in 2018, while global practices vary significantly:

• United States: Taxes long-term gains with holding period incentives and inflation adjustments
• European countries: Light taxation or exemptions under specific conditions
• Singapore and Hong Kong: No capital gains taxation

The primary concern centers on predictability rather than rates, particularly for foreign portfolio investors facing interpretational challenges and treaty uncertainties.

Retail Investor Market Participation

Current market structure shows substantial retail investor involvement:

This represents a structural shift requiring careful nurturing. The SIP culture has transformed Indian markets, with monthly inflows providing steady counterbalance to volatile global flows. However, retail investors remain extremely sensitive to tax changes, particularly sudden shifts affecting debt or hybrid funds.

Infrastructure and Fiscal Policy Recommendations

The economy requires momentum through decisive government capital expenditure expansion, particularly in defence. Political instability across South Asia emphasizes India's position as the region's only stable democracy, necessitating higher national security investment.

Current government expenditure structure presents rebalancing opportunities:

Maintaining fiscal discipline below 5% while increasing capex requires sharp revenue expenditure curtailment. With inflation at relatively low levels, conditions appear favorable for launching an ambitious multi-year National Infrastructure Plan.

Market Development Priorities

Over 500 companies have raised capital through India's IPO markets in the last two years, reflecting growing entrepreneurial momentum. This demonstrates how private ambition meets public participation, with retail investors playing increasingly important roles.

For sustained domestic capital formation, mutual funds require predictable, long-term tax treatment. The objective should maintain household savings within the formal financial system, avoiding migration toward unproductive assets like real estate or low-yield bank deposits.

Long-term equity ownership must receive active encouragement if policymakers want patient capital funding capex cycles, innovation, and business expansion. The scale advantage of over 13 crore unique demat accounts can compensate for lower tax rates through higher volumes, while widening the tax base unlocks substantial government revenues through direct taxes and indirect levies.

India's Union Budget represents far more than a financial document—it serves as a comprehensive blueprint for the country's economic growth and signals policy direction to citizens, investors, and businesses. Since the first budget of independent India was delivered by RK Shanmukham Chetty on 26 November 1947, several landmark budgets have fundamentally reshaped the nation's economic landscape. These historic fiscal presentations have introduced transformative policies, navigated economic crises, and set the foundation for India's modern economy.

The Foundation: Wealth Tax Introduction (1957)

The Union Budget of 1957-58 marked a significant milestone in India's fiscal policy when Finance Minister TT Krishnamachari introduced the wealth tax for the first time in the country's history. This groundbreaking measure aimed to reduce inequality and broaden the tax base, expanding the government's fiscal toolkit.

This tax remained an integral part of India's tax law for nearly six decades before its eventual abolition in 2015.

Crisis Management: The Black Budget (1973)

The 1973 Budget, presented by Yashwantrao Chavan, earned the infamous moniker 'Black Budget' due to the severe economic challenges India faced at the time. The budget highlighted the limitations of government finances during a period of significant economic distress.

Reform Catalyst: Carrot and Stick Budget (1986)

Presented on 28 February 1986 by VP Singh under the Congress government, this budget marked the first significant step toward abolishing the License Raj system in India. The budget earned its distinctive name due to its dual approach of providing incentives while imposing strict penalties.

Economic Transformation: Manmohan Singh's Epochal Budget (1991)

Widely regarded as one of the most important budgets in India's history, the 1991 Union Budget presented by Dr Manmohan Singh fundamentally transformed the Indian economy. Delivered during a severe balance of payments crisis with critically low foreign exchange reserves, this budget introduced comprehensive economic reforms.

The epochal budget ushered in an era of liberalization, privatization, and globalization through several key measures:

• Removal of restrictive licenses
• Deregulation of industries
• Opening the Indian economy to foreign investments
• Transition from state-controlled to competitive market economy

These transformative changes boosted India's economic growth, attracted foreign capital, and significantly enhanced India's position in the global economy.

Tax Revolution: P Chidambaram's Dream Budget (1997)

P Chidambaram's 1997 budget earned the title 'Dream Budget' for its comprehensive overhaul of India's tax system. The budget focused on simplification and competitiveness, making fundamental changes to fiscal policy.

This budget is remembered for making India more growth-oriented and investor-friendly, establishing a foundation for sustained economic development.

Modern Impact: Nirmala Sitharaman's Tax Reforms (2025)

Union Finance Minister Nirmala Sitharaman's 2025 Budget stands as a landmark achievement in addressing India's consumption challenges. At a time when consumption was declining, the budget provided substantial relief to millions of taxpayers, particularly benefiting the middle class.

The introduction of new tax slabs and reduced income tax liabilities under the New Tax Regime delivered immediate results, providing taxpayers with increased disposable income and stimulating economic consumption.