The government is not currently considering any proposal to eliminate the long-term capital gains (LTCG) tax on equity transactions for retail and domestic investors, as stated by Minister of State for Finance Pankaj Chaudhary in Parliament. Tax policies, including capital gains rates, are periodically reviewed during the annual budget process and legislative revisions, taking macroeconomic parameters into account.
LTCG tax collections from equity transactions saw a significant increase, rising from Rs 72,249 crore in assessment year (AY) 2024-25 to Rs 1,29,158 crore in AY 2025-26. Over the two years, the government collected Rs 2.01 lakh crore through LTCG tax. The LTCG tax rate on listed equities and equity mutual funds stands at 12.5 per cent, applicable only on gains exceeding Rs 1.25 lakh per financial year, with assets held for over 12 months considered long-term capital assets.
Regarding questions about Foreign Portfolio Investors (FPIs) being exempt from LTCG tax while domestic and retail investors are not, the minister clarified that the 12.5 per cent LTCG tax rate on equity investments applies equally to FPIs, domestic investors, and retail investors. The government has rationalized the tax treatment for FPIs in Government Securities (G-Secs) through the Income-tax (Amendment) Ordinance, 2026, exempting such investments from income tax on interest or capital gain.
Finance Minister Nirmala Sitharaman, in May, expressed the government’s openness to addressing concerns raised by stock market investors regarding the tax system, including LTCG and short-term capital gains (STCG) tax, without committing to a reduction in the tax rate.
