Govt says no proposal currently to scrap LTCG tax on equities

The government has told Parliament on July 20 that there is currently no proposal to scrap the long-term capital gains tax on equity transactions for retail and domestic investors, a demand from market participants to revive sentiment.

Minister of State for Finance Pankaj Chaudhary made the statement in a written reply in the Lok Sabha, responding to a query on when the government would scrap LTCG for retail and domestic investors to revive market sentiment, protect domestic investors and ensure a level playing field between foreign and Indian investors. "There is no such proposal under consideration," he said. He added that tax policies, including capital gains rates, are reviewed periodically as part of the annual budget process and legislative revisions, after taking macroeconomic parameters into account.

LTCG collections on equity transactions jumped nearly 78% between assessment years, rising from Rs 72,249 crore in AY 2024-25, relevant to FY 2023-24, to Rs 1,29,158 crore in AY 2025-26, relevant to FY 2024-25. Across the two years the government raised Rs 2.01 lakh crore through LTCG.

Long-Term Capital Gains (LTCG) tax on listed equities and equity mutual funds is set at 12.5%, applicable only on gains exceeding Rs 1.25 lakh per financial year.

An asset is considered a long-term capital asset if held for more than 12 months.

Responding to questions on whether Foreign Portfolio Investors (FPIs) have been exempted from LTCG tax while domestic and retail investors continue to pay the levy, the government said the 12.5% LTCG tax rate on equity investments is the same for FPIs, domestic investors and retail investors.

"The tax rate of 12.5% on LTCG for domestic and retail investors is the same for FPIs for investments in equity. Through the Income-tax (Amendment) Ordinance, 2026, the government has rationalised the tax treatment applicable to investments by FPIs only in Government Securities (G-Secs), by exempting such investments from income tax on any interest or capital gain," said Chaudhary.

In May, Union Finance Minister Nirmala Sitharaman had said the government is willing to listen to concerns raised by stock market investors regarding the tax system, including issues related to LTCG and short term capital gains (STCG) taxation.

"On this specific issue, and on any issue, we are always ready and willing to listen to the people. We will certainly take their inputs," Sitharaman said while responding to questions regarding demands from stock market participants for a review of LTCG and STCG taxes.