The government said there is no proposal to abolish LTCG tax on equity investments.
Capital gains taxation will continue to be reviewed as part of the annual Budget process.
The Centre clarified that the 12.5% LTCG tax rate is the same for FPIs and domestic investors.
No Proposal To Scrap LTCG On Equities, Government Tells Parliament
The Centre said there is no proposal to abolish long-term capital gains tax on equity transactions, adding that capital gains taxation is reviewed periodically as part of the Budget process
No Proposal To Scrap LTCG On Equities, Government Tells Parliament
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The government has clarified that it is not considering scrapping the long-term capital gains (LTCG) tax on equity transactions for retail and domestic investors, rejecting demands from sections of the market for tax relief to boost investor sentiment.
In a written reply in the Lok Sabha on Monday, Minister of State for Finance Pankaj Chaudhary said there is "no such proposal under consideration" when asked whether the government planned to abolish LTCG tax on equity investments to revive market sentiment, protect domestic investors and ensure a level playing field with foreign investors.
He added that tax policies, including capital gains tax rates, are reviewed periodically as part of the annual Budget process and legislative revisions after considering macroeconomic factors.
LTCG Collections Cross ₹2 Lakh Cr
According to the government, collections from LTCG tax on equity transactions rose to ₹1,29,158 crore in AY 2025-26 (FY25) from ₹72,249 crore in AY 2024-25 (FY24).
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Over the two assessment years, the government collected ₹2.01 lakh crore through LTCG tax.
Long-term capital gains on listed equities and equity mutual funds are taxed at 12.5%, with the levy applicable only on gains exceeding ₹1.25 lakh in a financial year. Equity investments held for more than 12 months qualify as long-term capital assets.
Government Clarifies FPI Tax Treatment
Responding to questions on whether Foreign Portfolio Investors (FPIs) receive preferential treatment, the government said the 12.5% LTCG tax rate on equity investments is the same for FPIs, domestic investors and retail investors.
Chaudhary said the Income-tax (Amendment) Ordinance, 2026 only rationalised the tax treatment for FPIs investing in Government Securities (G-Secs) by exempting interest income and capital gains from such investments from income tax.
He clarified that the exemption does not apply to equity investments.
Earlier in May, Union Finance Minister Nirmala Sitharaman had said the government remains open to feedback from market participants on the taxation of long-term and short-term capital gains.
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"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 had said while responding to concerns raised by stock market investors over LTCG and STCG taxation.