No proposal at present to scrap LTCG on equity transactions: Finance Ministry

The Finance Ministry has clarified that there is no proposal to scrap the long-term capital gains (LTCG) tax for domestic investors. In a written response in Parliament on Monday, the Ministry also revealed that LTCG tax collections on equities nearly doubled in r 2024–25 compared to the previous fiscal.

“At present, there is no such proposal under consideration,” said Minister of State for Finance Pankaj Chaudhary. He was responding to a query about whether the government plans to scrap the long-term capital gains (LTCG) tax for retail and domestic investors to protect them, revive market sentiment and ensure a level playing field with foreign investors.

The issue of reviewing capital gains tax hit the headlines in May when Finance Minister Nirmala Sitharaman said that the government is open to feedback on LTCG and STCG taxes amid foreign portfolio investor (FPI) outflows.

“On this specific issue, and on any issue, we are always ready and willing to listen to the people,” Sitharaman said. When asked about requests from stock market participants to review long-term and short-term capital gains taxation, she added, “We will definitely take their inputs.”

Chaudhary added that taxation policies are normally reviewed during the annual budget. “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 macro-economic parameters,” he said.

Currently, LTCG on equities is levied at 12.5 per cent for both domestic and foreign investors. Long-term capital gains apply to profits made from selling equities after holding them for at least 12 months.

The Finance Ministry also shared data showing a sharp rise in revenue collections from LTCG tax on equity transactions. The Government revenue from LTCG tax increased nearly 78 per cent to ₹1.29 lakh crore in FY25 (Assessment Year 2025-26) from ₹72,249 crore in FY24 (AY 2024-25). The Minister added that data for AY2026-27 and AY2027-28 is not yet available as income tax returns for the corresponding financial years are still being filed.