Govt Rules Out Scrapping LTCG Tax On Stocks For Retail Investors

New Delhi, July 20: There is no proposal under the consideration of the government at present to scrap the long-term capital gains (LTCG) tax on equity transactions for retail and domestic investors, Minister of State for Finance Pankaj Chaudhary informed Parliament on Monday.

Government clarifies LTCG stance

In a written reply to a question in the Lok Sabha, the minister further stated 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 tax collections on equity transactions rose from Rs 72,249 crore in assessment year (AY) 2024-25, relevant to financial year 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 tax.

Equity tax rates explained

The LTCG tax on listed equities and equity mutual funds has been fixed at 12.5 per cent, which is 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.

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In answer 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 minister explained that the 12.5 per cent LTCG tax rate on equity investments is the same for FPIs, domestic investors and retail investors.

"The tax rate of 12.5 per cent 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," the minister stated.

Government addresses investor concerns

Finance Minister Nirmala Sitharaman had said in May this year that 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) tax.

However, she did not give any assurance that there would be reduction in the tax rate.

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