Tax on stock market earnings
The government told Parliament on July 20 that there is no proposal as of now to abolish Long-Term Capital Gains Tax (LTCG) on equity transactions for retail and domestic investors, although marketers were demanding it to improve market sentiment. Minister of State for Finance Pankaj Chaudhary was asked in a written reply in the Lok Sabha as to when the government will abolish LTCG for retail and domestic investors so that market sentiment improves, domestic investors are protected and an equal environment is created between foreign and Indian investors. He said that no such proposal is under consideration. He further said that tax policies, including capital gains rates, are reviewed from time to time as part of the annual budget process and legislative changes, taking into account macro-economic parameters.
How much did the government earn from taxes?
LTCG collection on equity transactions increased from Rs 72,249 crore in assessment year 2024-25 related to financial year 2023-24 to Rs 1,29,158 crore in assessment year 2025-26 related to financial year 2024-25. In these two years, the government raised Rs 2.01 lakh crore through LTCG. Long-term capital gains (LTCG) tax on listed equity and equity mutual funds has been fixed at 12.5 per cent, applicable only on profits above Rs 1.25 lakh per financial year. If an asset is held for more than 12 months, it is considered a long-term capital asset.
equal tax on all
Responding to a question on whether foreign portfolio investors (FPIs) have been exempted from LTCG tax while domestic and retail investors are still paying this tax, the government said the 12.5 per cent LTCG tax rate on equity investments is the same for FPIs, domestic investors and retail investors. Chaudhary said the 12.5 per cent tax rate on LTCG for domestic and retail investors is the same as for FPIs investing in equities. Through the Income-Tax (Amendment) Ordinance, 2026, the government has rationalized the tax rules applicable only to investments by foreign investors in government securities (G-Secs), and exempted such investments from income tax on any interest or capital gains.
FM had replied in May
In May, Union Finance Minister Nirmala Sitharaman had said that the government was ready to listen to the concerns of stock market investors related to the tax system, including issues related to LTCG and short-term capital gains (STCG) tax. Responding to questions asked by people involved in the stock market about the demand for review of LTCG and STCG tax, Sitharaman said that on this particular issue, and on any issue, we are always ready to listen to the people. We will definitely consider their suggestions.
