LTCG tax on equity not being scrapped, says Finance Minister
Synopsis
The government has ruled out scrapping LTCG tax on equity — and the revenue data explains why. Collections nearly doubled in a year, reaching ₹1,29,158 crore in AY 2025-26, with ₹2.01 lakh crore raised across two years. Despite Finance Minister Sitharaman signalling openness to investor concerns, Monday's Lok Sabha reply makes clear that a rollback is not on the table.
Key Takeaways
Minister of State for Finance Pankaj Chaudhary confirmed on 20 July that there is no proposal to scrap LTCG tax on equity transactions.
LTCG collections on equity rose from ₹72,249 crore in AY 2024-25 to ₹1,29,158 crore in AY 2025-26.
The government collected ₹2.01 lakh crore in LTCG tax across the two assessment years.
The 12.5 per cent LTCG rate applies equally to FPIs, domestic investors, and retail investors for equity.
FPIs received a separate exemption on Government Securities (G-Secs) via the Income-tax (Amendment) Ordinance, 2026 — not on equity.
Finance Minister Nirmala Sitharaman had expressed willingness to hear investor concerns in May 2025 but gave no assurance on rate cuts.
Minister of State for Finance Pankaj Chaudhary told Parliament on Monday, 20 July that the government has no proposal under active consideration to abolish the long-term capital gains (LTCG) tax on equity transactions for retail and domestic investors. The clarification came in a written reply to a question raised in the Lok Sabha, putting to rest speculation about a possible rollback of the levy.
What the Minister Said
Chaudhary stated that tax policies, including capital gains rates, are reviewed periodically as part of the annual budget process and legislative revisions, after factoring in macroeconomic parameters. The minister's reply did not leave any room for a near-term policy reversal, despite growing investor sentiment in favour of relief.
LTCG Collections Surge to ₹2.01 Lakh Crore
LTCG tax collections on equity transactions climbed sharply — from ₹72,249 crore in assessment year (AY) 2024-25, corresponding to financial year 2023-24, to ₹1,29,158 crore in AY 2025-26, corresponding to FY 2024-25. Cumulatively, the government collected ₹2.01 lakh crore through LTCG tax across these two years — a figure that underscores why a scrapping of the levy would represent a significant fiscal trade-off.
How the Tax Works
The LTCG tax on listed equities and equity mutual funds is fixed at 12.5 per cent, applicable only on gains exceeding ₹1.25 lakh per financial year. An asset qualifies as a long-term capital asset if held for more than 12 months. The minister clarified that this rate applies uniformly to Foreign Portfolio Investors (FPIs), domestic investors, and retail investors alike for equity investments.
FPI Exemption Row: What the Government Clarified
Questions had been raised about whether FPIs enjoy an exemption from LTCG tax while domestic investors continue to bear the burden. Chaudhary addressed this directly, stating: 'The tax rate of 12.5 per cent on LTCG for domestic and retail investors is the same for FPIs for investments in equity.' He did, however, note that through the Income-tax (Amendment) Ordinance, 2026, the government has rationalised tax treatment for FPI investments specifically in Government Securities (G-Secs), exempting such investments from income tax on interest or capital gains — a carve-out that does not extend to equity.
Sitharaman's Earlier Signals and What Comes Next
Finance Minister Nirmala Sitharaman had, in May 2025, indicated that the government is willing to hear concerns from stock market investors regarding both LTCG and short-term capital gains (STCG) tax. However, she stopped short of giving any assurance on rate reductions. Monday's parliamentary reply reinforces that position. With collections nearly doubling in a single year, any rollback would require a compelling fiscal offset — something the government has not signalled it is prepared to arrange.
Point of View
29,158 crore in AY 2025-26, this is no longer a marginal revenue line. Any rollback would create a hole the government would struggle to plug without alternative measures. The FPI carve-out on G-Secs, however, deserves closer scrutiny: exempting foreign capital from tax on sovereign debt while retail investors pay 12.5 per cent on equity gains is a policy asymmetry that Parliament was right to question. Sitharaman's May signals of 'listening' now look like managed expectations rather than genuine policy intent.
NationPress
21 Jul 2026
Frequently Asked Questions
Is the government planning to scrap LTCG tax on equity in India?
No. Minister of State for Finance Pankaj Chaudhary confirmed in a Lok Sabha written reply on 20 July that there is no proposal under active consideration to abolish LTCG tax on equity transactions for retail or domestic investors.
What is the current LTCG tax rate on equity in India?
The LTCG tax rate on listed equities and equity mutual funds is 12.5 per cent, applicable only on gains exceeding ₹1.25 lakh per financial year. An asset must be held for more than 12 months to qualify as a long-term capital asset.
Are FPIs exempt from LTCG tax on equity?
No. The 12.5 per cent LTCG tax rate on equity investments applies equally to Foreign Portfolio Investors (FPIs), domestic investors, and retail investors. FPIs did receive a separate exemption, but only on Government Securities (G-Secs) under the Income-tax (Amendment) Ordinance, 2026 — not on equity.
How much has the government collected through LTCG tax on equity?
LTCG tax collections on equity rose from ₹72,249 crore in AY 2024-25 to ₹1,29,158 crore in AY 2025-26, totalling ₹2.01 lakh crore across the two assessment years.
What did Finance Minister Nirmala Sitharaman say about LTCG tax?
Sitharaman said in May 2025 that the government is willing to hear stock market investors' concerns on LTCG and STCG tax. However, she gave no assurance of a rate reduction, and the July Lok Sabha reply reinforces that no change is imminent.
