The Indian government confirmed on Monday that it has no plans to abolish the long-term capital gains (LTCG) tax on equity transactions. Minister of State for Finance Pankaj Chaudhary made the statement in a written reply to the Lok Sabha, addressing speculation about a potential rollback that some market participants had anticipated.
Key Details
Chaudhary emphasized that there is currently no proposal under consideration to scrap the LTCG tax, which is levied on profits from selling capital assets such as stocks and mutual funds. The tax applies to gains exceeding ₹1.25 lakh in a financial year and is set at a flat rate of 12.5% for long-term capital gains, while short-term gains are taxed at 20% if the assets are held for less than 12 months. The government’s decision comes after Finance Minister Nirmala Sitharaman indicated in May that the government was open to addressing investor concerns regarding the taxation framework.
Background
The LTCG tax has generated significant revenue for the government, with collections rising nearly 79% year-on-year, from ₹72,249 crore in the assessment year 2024-25 to ₹1,29,158 crore in 2025-26. Over the two assessment years, total LTCG tax collections from equity transactions reached ₹2.01 lakh crore. The government reviews tax policies periodically as part of its annual budget process, taking macroeconomic parameters into account.
The government's decision to maintain the LTCG tax could impact investor sentiment in the equity markets, particularly among retail and domestic investors who may have hoped for a tax rollback to stimulate market activity. Investors will watch for any future discussions or proposals regarding tax reforms in the upcoming budgetary review.