The Union government on Monday ruled out any proposal to abolish long-term capital gains (LTCG) tax on equity investments, informing the Lok Sabha that the levy generated more than ₹2.01 lakh crore in revenue over the past two assessment years (AYs). The tax regime for domestic investors and foreign portfolio investors (FPIs) remains the same for equity investments, the government said.
Replying to
an unstarred question by Samajwadi Party's member of Parliament (MP) Anand Bhadauria, Union minister of state for finance Pankaj Chaudhary said there is 'no such proposal under consideration' to scrap LTCG tax for retail and domestic investors.
According to the government, LTCG tax on equity transactions generated ₹72,249 crore in AY24-25, corresponding to the financial year (FY)23-24, and ₹1,29,158 crore in AY25-26, corresponding to FY24-25.
The government said data for AY26-27 and AY27-28, relating to FY25-26 and FY26-27 respectively, is not yet available as income-tax returns (ITRs) for those assessment years are yet to be filed.
Responding to concerns that FPIs had been exempted from LTCG tax while domestic investors continued to pay 12.5% tax on equity gains, the finance ministry clarified that FPIs are not exempt from LTCG tax on equity investments.
"The tax rate of 12.5% on LTCG for domestic and retail investors is the same for FPIs for investments in equity," the minister said.
The government explained that the recent tax exemption introduced through the Income-tax (Amendment) Ordinance, 2026, applies only to investments made by FPIs in government securities (G-Secs) and not to equity investments.
The exemption, effective 1 April 2026, covers any interest income or capital gains earned by FPIs from investments in G-Secs on or after that date.
Explaining the rationale for the move, the minister said the amendment was introduced to create a competitive tax regime for investments in G-Sec and align India's tax treatment with several comparable jurisdictions.
According to the government, the measure is aimed at ensuring stable and systematic inflows of durable foreign capital while attracting long-term institutional investors such as pension funds, insurance companies and sovereign wealth funds.
The ministry said the policy decision was taken recognising the importance of a competitive tax framework in attracting global capital into the government securities market.
On the demand to remove LTCG tax for retail investors to improve market sentiment and create a level playing field with foreign investors, the government reiterated that there is no proposal to abolish the levy at present.
However, it added that tax policies, including capital gains taxation, are reviewed periodically as part of the annual Budget process and legislative revisions, taking into account prevailing macroeconomic conditions and other relevant factors.
The clarification comes amid continuing debate over capital gains taxation and concerns among some domestic investors about the impact of taxes on investment returns, even as the government maintains that the equity tax regime is applied uniformly to both domestic investors and FPIs.
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