With preparations for the upcoming Union Budget 2027–28 picking up momentum in New Delhi, the PHD Chamber of Commerce and Industry (PHDCCI) has formally submitted a comprehensive pre-Budget memorandum to Union Finance Minister Nirmala Sitharaman. Aimed at boosting domestic retail participation in capital markets, driving industrial competitiveness, and alleviating financial stress across India’s micro, small, and medium enterprises (MSME) ecosystem, the industry body’s recommendations outline key tax rationalisations and credit enhancements.

At the heart of the submission is a direct call to eliminate the 12.5% Long-Term Capital Gains (LTCG) tax on equity investments and reduce the Short-Term Capital Gains (STCG) tax rate from 20% down to 10%. Highlighting that high transactional taxes stifle long-term wealth creation, PHDCCI’s proposals focus heavily on revitalising investor sentiment and ensuring liquidity for domestic businesses.

1. Complete Abolition of Equity LTCG Tax and 50% Reduction in STCG Rates

The flagship recommendation presented by the PHDCCI delegation centres on relieving equity investors from capital gains taxation. Under current tax regulations, long-term capital gains exceeding ₹1.25 lakh on listed equities and equity-oriented mutual funds are taxed at a flat rate of 12.5%. Short-term capital gains, derived from assets held for less than 12 months, attract a 20% tax rate.

PHDCCI has proposed scrapping the 12.5% LTCG tax altogether, alongside cutting the STCG tax in half to 10%. The chamber argued that eliminating LTCG tax would motivate households to channel long-term savings into formal capital markets, supporting corporate fundraising and expanding domestic liquidity. To further decrease transaction friction, PHDCCI also recommended lowering Securities Transaction Tax (STT) rates.

2. Relaxing MSME NPA Classification Norms from 90 Days to 180 Days

Addressing systemic bottlenecks in working capital cycles, PHDCCI urged the Finance Ministry to extend the Non-Performing Asset (NPA) classification period for MSMEs from the existing 90-day threshold to 180 days. Small business enterprises frequently encounter payment delays from public and private buyers, leading to temporary cash flow mismatches that risk triggering premature default asset tagging.

Allowing a 180-day overdue window would provide smaller firms with operational breathing room to recover receivables without losing access to formal banking credit lines. PHDCCI emphasized that safeguarding small manufacturers from sudden NPA categorization is essential for sustaining India’s domestic supply chains and preserving employment across regional industrial hubs.

3. Enhancing Pradhan Mantri MUDRA Yojana Loan Limits Across Categories

To foster grassroots entrepreneurship and bridge financial inclusion gaps, PHDCCI proposed a structural upward revision of credit ceilings under the Pradhan Mantri MUDRA Yojana (PMMY). Given the inflationary pressures and increased operational costs since the scheme’s inception, the chamber recommended scaling up maximum collateral-free credit limits across all three core categories:

• Shishu Category: Raising the ceiling to ₹1 lakh to support micro micro-enterprises and informal traders.

• Kishore Category: Expanding the limit to ₹10 lakh for growing small business setups.

• Tarun & Tarun Plus Categories: Increasing loan availability up to ₹20 lakh for expanding industrial enterprises.

The chamber noted that expanding credit access through MUDRA and strengthening the implementation of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) would boost capital formation in rural and semi-urban commercial centers.

4. Customs Duty Exemptions on LNG and Key Industrial Feedstocks

To enhance the cost competitiveness of Indian manufacturing and accelerate transition goals towards cleaner energy sources, PHDCCI recommended removing the existing 2.5% basic customs duty on Liquefied Natural Gas (LNG) and essential petroleum feedstocks.

High import duties on energy inputs directly elevate manufacturing overheads for energy-intensive sectors, including fertilizers, petrochemicals, glass, and steel. Eliminating tariffs on LNG imports would lower production costs, help curb industrial energy inflation, and align domestic manufacturing costs with global market benchmarks.

5. Strengthening Credit Guarantee Infrastructure and Manufacturing Incentives

Rounding out its five core recommendations, PHDCCI called for enhanced institutional support to turn India into a global manufacturing center. The chamber highlighted the need for seamless deployment of government support schemes, broader equity assistance mechanisms for first-generation founders, and simplified compliance structures.

“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,” stated Dr. Ranjeet Mehta, Secretary General and CEO of PHDCCI. As Union Budget 2027 consultations progress, investors and industry leaders will closely monitor how the Finance Ministry balances these tax relief demands against fiscal deficit targets.