The government on Monday ruled out scrapping the long-term capital gains (LTCG) tax on listed equities, saying there is currently no proposal under consideration to abolish the levy for retail and domestic investors.
Responding to a 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 added that tax policies, including capital gains tax rates, are reviewed periodically as part of the annual Budget exercise after considering broader macroeconomic conditions.
The clarification comes amid recurring calls from investors and market participants to roll back the tax, 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.
However, the government indicated there is little appetite for such a move, pointing to a sharp rise in tax collections from equity gains.
According to data shared in Parliament, 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.
Long-term capital gains arise when listed shares or equity-oriented mutual funds are sold after being held for more than one year.
Under the current tax regime, gains exceeding , while gains up to that threshold remain exempt.
Short-term capital gains on listed equities are taxed at 20%.
These rates have remained unchanged since the changes announced in the July 2024 Union Budget.
The issue has resurfaced several times over the past year as equity markets touched record highs 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.
Those expectations, however, have repeatedly been tempered by the government’s stance. Similar questions on abolishing the tax have been raised in Parliament in the past, with the Finance Ministry consistently maintaining that there is no proposal to withdraw the levy.
Monday’s clarification reinforces that position. 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.