New Delhi: There have been demands from sections of the stock market that the long-term capital gains (LTCG) tax be removed to boost investor sentiment.
However, the Union government on Monday ruled out the possibility of abolishing the tax on listed equities.
Responding to a question in Lok Sabha on the first day of Parliament’s Monsoon session, Minister of State for Finance Pankaj Chaudhary said the Centre currently has no plan to withdraw the LTCG tax on retail and domestic investors.
Chaudhury stated that tax policies, including capital gains tax rates, are reviewed periodically as part of the annual Budget exercise after taking into consideration broader macroeconomic conditions.
The clarification comes amid recurring calls from
Investors and market participants have, from time to time, been asking for the tax to be rolled back.
Some believe that LTCG tax discourages people from long-term investment and reduces post-tax returns. Others have argued that there should be parity between domestic investors and foreign investors after the government announced tax exemptions for foreign portfolio investors (FPIs) investing in government securities.
Revenue from LTCG tax on equity transactions rose from Rs 1,29,158 crore to Rs 72,249 – an increase of 78% — in Assessment Year 2025-26, as per data shared in Parliament. That makes LTCG tax an important component in the country’s exchequer.
LTCG tax is imposed when listed shares or equity-oriented mutual funds are sold after being held for more than one year. Gains exceeding Rs 1.25 lakh in a financial year are taxed at 12.5%, but gains below that amount remain exempt.
As for short-term capital gains, listed equities are taxed at 20%.