The Centre has no plans to scrap the long-term capital gains (LTCG) tax on equity investments, the government informed Parliament on Monday. However, it said tax policies and rates are reviewed periodically to align with macroeconomic conditions.
Replying to a question in Parliament, Minister of State for Finance Pankaj Chaudhary said there is currently no proposal under consideration to remove LTCG tax on equities.
"At present, there is no such proposal under consideration. The tax policies, including capital gains tax rates, are reviewed periodically as part of the annual budgetary process and legislative revisions after taking into consideration the macroeconomic parameters," Chaudhary said.
Data presented by the Finance Ministry in Parliament showed that revenue from LTCG tax on equity transactions rose sharply by nearly 79% over the past two assessment years, from Rs 72,249 crore in AY 2024-25 to Rs 1,29,158 crore in AY 2025-26.
The minister's statement is expected to quell speculation that the government may offer tax relief on LTCG arising from equity investments. The speculation gained traction after the government recently announced tax exemptions for certain debt investments by foreign investors.
The government has rationalised the tax treatment applicable to investments by foreign portfolio investors (FPIs) in government securities by exempting income arising from interest and capital gains on such investments from income tax. However, the LTCG tax rate on listed equity investments remains unchanged at 12.5% for both domestic investors and FPIs.
As a result, foreign investors continue to pay the same LTCG tax as domestic investors on gains from listed equities, while only their investments in government bonds have been granted tax exemptions.
Explaining the rationale behind the exemption for government securities, the government said the move was aimed at creating a competitive tax regime to attract global capital.
In a policy overhaul, the Reserve Bank of India has also expanded the Fully Accessible Route (FAR)-designated securities to include all new issuances of 15-year, 30-year and 40-year government bonds.
"These changes, along with the tax exemptions, should support the inclusion of Indian government bonds in the Bloomberg bond index," a Finance Ministry official told The New Indian Express.
On demands for rationalising capital gains taxation on equities, an official had earlier told TNIE that the government would examine suggestions but is not considering any knee-jerk response to stem foreign institutional investor (FII) outflows from Indian equity markets.