KEY TAKEAWAYS
- Government has no proposal to scrap LTCG tax on equities, MoS Finance Pankaj Chaudhary tells Lok Sabha
- LTCG collections jumped nearly 78%, from Rs 72,249 crore (AY 2024-25) to Rs 1,29,158 crore (AY 2025-26)
- Two-year LTCG mop-up from equities stands at Rs 2.01 lakh crore
- FPIs, domestic investors and retail investors all pay the same 12.5% LTCG rate on equities, no exemption for foreign investors
- FPIs got a separate G-Secs tax exemption in 2026, unrelated to equity LTCG
- FM Sitharaman had earlier said govt is “willing to listen” to investor demands, but no formal review is on the table
The government has no plans to scrap the Long-Term Capital Gains (LTCG) tax on equities, Parliament was told on Monday, ending speculation that had built up after Finance Minister Nirmala Sitharaman’s recent remarks on the issue. Minister of State for Finance Pankaj Chaudhary made the clarification in a written reply in the Lok Sabha, even as data he shared showed LTCG collections from equities have jumped nearly 78% over two years.
What The Government Told Parliament
Responding to a question on when the government would scrap LTCG tax for retail and domestic investors to revive market sentiment, protect domestic investors, and create a level playing field with foreign investors, Chaudhary was direct: “There is no such proposal under consideration.” He added that capital gains rates are reviewed periodically as part of the annual Budget process and legislative revisions, factoring in prevailing macroeconomic conditions.
The clarification comes even as brokerages and retail investor groups have repeatedly pushed for relief on LTCG tax on equities, arguing that high capital gains taxation dampens participation at a time when domestic markets are already contending with volatility from crude oil prices and global geopolitical tensions.
LTCG Collections Jump 78% In Two Years
The numbers Chaudhary placed before the Lok Sabha explain why any rollback looks unlikely in the near term. LTCG collections on equity transactions rose from Rs 72,249 crore in Assessment Year 2024-25 (relevant to FY 2023-24) to Rs 1,29,158 crore in Assessment Year 2025-26 (relevant to FY 2024-25). That is a jump of nearly 78% in a single year, taking the combined two-year haul to Rs 2.01 lakh crore.
| Period | LTCG Tax Collection |
|---|---|
| AY 2024–25 (FY 2023–24) | ₹72,249 crore |
| AY 2025–26 (FY 2024–25) | ₹1,29,158 crore |
| Two-Year Total | ₹2.01 lakh crore |
| Year-on-Year Growth | ~78% |
For context, LTCG tax on listed equities and equity mutual funds currently stands at 12.5%, applicable only on gains exceeding Rs 1.25 lakh in a financial year. An asset qualifies as long-term only if held for more than 12 months. With markets having delivered strong gains through much of FY 2024-25, the surge in collections tracks the broader rally in Indian equities during that period.
FPIs And Domestic Investors: Same Rate, Different Confusion
A second question in the Lok Sabha asked whether Foreign Portfolio Investors (FPIs) have been let off LTCG tax while domestic and retail investors continue paying it. The government’s answer: no, the 12.5% LTCG rate on equity investments applies equally to FPIs, domestic institutions, and retail investors alike.
| Category | LTCG Tax Rate / Status |
|---|---|
| Retail Investors | 12.5% |
| Domestic Institutional Investors (DIIs) | 12.5% |
| Foreign Portfolio Investors (FPIs/FIIs) | 12.5% |
| FPIs on Government Securities (from April 1, 2026) | Exempt from LTCG Tax |
The confusion likely stems from a separate move. Through the Income-tax (Amendment) Ordinance, 2026, the government exempted FPI investments specifically in Government Securities (G-Secs) from tax on interest income and capital gains, effective from April 1, 2026. That relief was designed to draw stable, long-term foreign capital into India’s debt market and had nothing to do with equity taxation, where FPIs continue to pay the same LTCG tax on equities as everyone else.
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Sitharaman’s May Signal: Government “Willing To Listen”
The Lok Sabha reply also puts into context remarks Sitharaman made in May at the TEXPROCIL Export Awards event in Mumbai, where she told reporters the government remains open to hearing investor concerns on both LTCG and STCG. “On this specific issue, and on any issue, we are always ready and willing to listen to the people. We will certainly take their inputs,” she had said, without committing to any formal review. Monday’s written reply confirms that openness to feedback has not yet translated into any concrete proposal on the table.
What This Means For Investors
For now, investors should treat the 12.5% LTCG tax on equities and the Rs 1.25 lakh annual exemption threshold as fixed for the foreseeable future, with no policy change likely before the next Budget cycle at the earliest. The steep rise in collections also signals a growing fiscal reliance on the LTCG tax on equities, which could make any future rate cut a harder sell to the exchequer even if market participants keep pushing for one.
NiftyTrader Desk View
| Parameter | Current Status |
|---|---|
| LTCG Rate on Equities | 12.5% (Unchanged) |
| Annual Exemption Threshold | ₹1.25 lakh |
| FY24–FY25 LTCG Tax Collection | ₹2.01 lakh crore |
| Any Proposal to Review or Scrap LTCG? | None, as of July 20, 2026 |
| Government’s Current Stance | LTCG changes are reviewed only during the Union Budget process |
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FAQs
Q1. Has the government scrapped LTCG tax on equities?
No. MoS Finance Pankaj Chaudhary told the Lok Sabha on July 20 that there is no proposal under consideration to scrap LTCG tax on equities.
Q2. What is the current LTCG tax rate on equities?
LTCG on listed equities and equity mutual funds is taxed at 12.5%, applicable only on gains above Rs 1.25 lakh in a financial year, for assets held over 12 months.
Q3. Do FPIs pay less LTCG tax than domestic investors?
No. FPIs pay the same 12.5% LTCG rate on equity investments as domestic and retail investors. A separate 2026 ordinance exempted FPIs only on Government Securities, not equities.
Q4. How much has the government collected from LTCG on equities recently?
Rs 2.01 lakh crore combined across AY 2024-25 and AY 2025-26, with collections rising nearly 78% year-on-year.
Q5. Could the government still revise LTCG tax in the future?
FM Sitharaman has said the government is open to hearing investor feedback, and capital gains rates are reviewed as part of the annual Budget process, but no formal review is currently underway.
Disclaimer: This article is for informational purposes only and should not be construed as investment or tax advice. Tax rates and government policy are subject to change; readers should consult a qualified tax advisor or refer to official government notifications before making investment decisions. NiftyTrader does not guarantee returns on any security discussed.
