Govt has no plan to abolish LTCG tax on equities transactions: Finance Ministry

The government on Monday informed Parliament that there was presently no plan to abolish the long-term capital gains (LTCG) tax on equities transactions for domestic and retail investors, despite market participants’ demands to improve sentiment.

In a written response to a question about when the government will discontinue LTCG for retail and domestic investors in order to boost market sentiment, safeguard domestic investors and guarantee fair competition between foreign and Indian investors, Minister of State for Finance Pankaj Chaudhary made the statement in the Lok Sabha.

“There is no such proposal under consideration,” he replied. After considering macroeconomic factors, he continued. Tax policies, including capital gains rates, are evaluated on a regular basis as part of the annual budget process and legislative amendments.

LTCG earnings on equity transactions increased to Rs 1,29,158 crore in AY 2025-26, relevant to FY 2024-25, from Rs 72,249 crore in AY 2024-25, relevant to FY 2023-24. The government used LTCG to raise Rs 2.01 lakh crore over the course of the two years.

Only gains over Rs 1.25 lakh per fiscal year are subject to the 12.5 per cent LTCG tax on listed stocks and equity mutual funds. If an asset is retained for longer than a year, it is classified as a long-term capital asset.

The government stated that the 12.5 per cent LTCG tax rate on equity investments is unchanged for FPIs, domestic investors and retail investors in response to inquiries about whether FPIs have been excluded from LTCG tax whereas domestic and retail investors are still required to pay the levy.

The government has rationalised the tax treatment applicable to FPI investments solely in Government Securities (G-Secs) by excluding such investments from income tax on any interest or capital gain by the Income-tax (Amendment) Ordinance, 2026, according to Chaudhary.

Earlier, Finance Minister Nirmala Sitharaman said in May that the government is open to hearing stock market investors’ concerns about the tax system, including those pertaining to short-term capital gains (STCG) and long-term capital gains (LTCG) taxation.

“On this specific issue, and on any issue, we are always ready and willing to listen to the people,” she said.

In response to inquiries about requests from stock market players for a review of LTCG and short-term capital gains (STCG) taxation, Sitharaman stated, “We will definitely take their inputs.”