LTCG tax remains on equities; government says no proposal to withdraw levy

The Centre on Monday ruled out any proposal to abolish the Long-Term Capital Gains (LTCG) tax on equity investments, informing Parliament that collections from the levy surged to Rs 1.29 lakh crore in Assessment Year (AY) 2025-26, reflecting strong gains in equity markets and higher tax revenues.

In a written reply to an unstarred question in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary said the government collected Rs 1,29,158 crore through LTCG tax on equity transactions in AY 2025-26 (relevant to FY25), compared with ₹72,249 crore in AY 2024-25 (relevant to FY24).

The government noted that data for subsequent assessment years is not yet available, as income tax returns for those years are yet to be filed.

Responding to concerns over whether Foreign Portfolio Investors (FPIs) receive preferential tax treatment, the Finance Ministry clarified that the 12.5 per cent LTCG tax rate on equity investments is the same for both domestic investors and FPIs.

More from Business

It also clarified that the recently announced tax exemption for FPIs applies only to investments in Government Securities (G-Secs) and not to equity investments. As a result, foreign investors continue to pay the same LTCG tax on equity gains as domestic investors.

Explaining the rationale for exempting FPIs from tax on investments in government securities, the government said the move is aimed at creating a more competitive tax regime to attract long-term global capital.

According to the Finance Ministry, the exemption aligns India's taxation framework for government securities with several comparable jurisdictions and is expected to encourage stable and long-term investments from institutions such as pension funds, insurance companies and sovereign wealth funds.

On whether the government is considering abolishing LTCG tax for retail investors, the Finance Ministry said no such proposal is currently under consideration.

The government, however, reiterated that tax policies, including capital gains tax rates, are reviewed periodically as part of the annual Union Budget exercise and legislative revisions, taking into account prevailing macroeconomic conditions.