The centre on Monday ruled out scrapping the long-term capital gains (LTCG) tax on listed equities. It maintained that there is currently no proposal under consideration to abolish the levy for retail and domestic investors. It indicated that there is little scope for such a move.
Responding to the question in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary said the Centre has no plans at present to withdraw the LTCG tax, despite demands from sections of the market that the levy be removed to boost investor sentiment. He highlighted that tax policies, including capital gains tax rates, are reviewed periodically as part of the annual Budget exercise after considering broader macroeconomic conditions.
The data shared at the parliament mentioned, revenue from LTCG tax on equity transactions rose nearly 78% to Rs 1,29,158 crore in Assessment Year 2025-26 from Rs 72,249 crore in the previous year, highlighting the levy’s growing contribution to the exchequer.
The clarification comes as the investors and market participants demanding a roll back, with some arguing that it discourages long-term investing and reduces post-tax returns. Others have sought parity between domestic investors and certain foreign investors after the government recently announced tax exemptions for foreign portfolio investors (FPIs) investing in government securities.
Over the past year equity markets have sky-rocketed and retail participation surged. Many investors and market experts had argued that reducing the LTCG tax rate or increasing the exemption limit could encourage long-term investing and improve market sentiment. However, their hopes have been shattered by the centre with the recent clarification.
While the government says tax policies are reviewed regularly, there is currently no indication that it plans to scrap the LTCG tax on equity investments.