Govt May Revise LTCG Tax On Shares Before Budget 2027

The Government of India could decide on restructuring long-term capital gains (LTCG) tax on equities in the coming weeks, ahead of Budget 2027, according to a report by Moneycontrol.

The proposed review covers equity investments held by domestic and foreign investors, with officials examining whether the existing tax framework affects India's attractiveness as an investment destination.

Currently, LTCG on equities is taxed at 12.5% without indexation benefits.

For listed shares, the tax applies to annual gains exceeding ₹1.25 lakh, while no such exemption threshold applies to unlisted shares.

Review Amid Foreign Investor Outflows

According to sources cited in the report, the Centre has held consultations with industry representatives, the Securities and Exchange Board of India (SEBI), the Central Board of Direct Taxes (CBDT), banks and other stakeholders.

Discussions have focused on the existing capital gains tax structure and its potential impact on foreign investment flows.

Foreign portfolio investors (FPIs) have withdrawn ₹3.1 lakh crore from Indian equities so far in 2026, compared with ₹1.7 lakh crore during 2025, according to Central Depository Services Ltd (CDSL) data.

Officials are reportedly comparing India's LTCG framework with taxation policies in other major economies.

The review also includes proposals aimed at making Indian equity markets more competitive internationally.

Dollar-Based Capital Gains Calculation Under Consideration

As per the report, the government is examining whether foreign investors should calculate taxable capital gains in US dollar terms rather than rupees.

Currently, gains are determined in Indian currency, which can affect the returns foreign investors realise after exchange-rate movements.

The government is also considering suggestions relating to the existing LTCG rate.

On Oct 13, Finance Minister Nirmala Sitharaman said the Centre was willing to hear views on removing the tax.

Indexation, which adjusts an asset's purchase cost for inflation, is another important feature of capital gains taxation, although the current equity LTCG framework does not provide this benefit.

No final decision has been announced.