Minister of State for Finance Pankaj Chaudhary told Parliament on Monday that there is no plan currently being considered by the government to abolish the long-term capital gains (LTCG) tax on equity transactions for retail and domestic investors.
As part of the annual budget process and legislative reforms, the minister further stated in a written response to a question in the Lok Sabha that tax policies, such as capital gains rates, are evaluated regularly after considering macroeconomic parameters.
From Rs 72,249 crore in assessment year (AY) 2024-25, which corresponds to financial year 2023-24, to Rs 1,29,158 crore in AY 2025-26, which corresponds to FY 2024-25, LTCG tax receipts on equity transactions surged. Through LTCG tax, the government collected Rs 2. 01 lakh crore over the course of the two years.
The LTCG tax on equity mutual funds and listed equities has been set at 12. 5%, which applies only to profits over Rs 1. 25 lakh each fiscal year. A long-term capital asset is one that has been kept for over 12 months.
The minister stated that the 12. 5% LTCG tax rate on equity investments is the same for FPIs, domestic investors, and retail investors in response to concerns about whether Foreign Portfolio Investors (FPIs) have been excluded from paying the levy while domestic and retail investors still do.
For investments in equity, the tax rate of 12. 5% on LTCG is the same for FPIs as it is for local and retail investors. The minister said that the government has rationalized the tax treatment relevant to FPI investments in G-Secs only by exempting such investments from income tax on any interest or capital gain through the Income-tax (Amendment) Ordinance, 2026.
The government is willing to hear worries brought up by stock market investors about the tax system, including issues regarding LTCG and short term capital gains (STCG) tax, according to Finance Minister Nirmala Sitharaman, who stated this in May of this year.
However, she did not promise a lower tax rate.