08:45
Illustration: Dominic Xavier/Rediff
The government on Monday clarified that there is currently no proposal under consideration to scrap the long-term capital gains (LTCG) tax, according to a response by Minister of State for Finance Pankaj Chaudhary in the Lok Sabha.
The tax rate of 12.5 per cent on equity LTCG is the same for domestic and retail investors as well as foreign portfolio investors (FPIs), said Chaudhary in a written response to a parliamentary question by Lok Sabha member Anand Bhadauria, dated July 20.
The response comes amidst a demand from certain market participants to cut the LTCG tax.
Chaudhary detailed that the government has rationalised tax treatment for FPIs only on government securities -- by exempting such investments from income tax on any interest of capital gain -- through the Income Tax (Amendment) Ordinance, 2026.
The exemptions are applicable from April 1.
'This step will align the taxation on government securities with many comparable jurisdictions. This will ensure stable systematic inflow of durable patient foreign capital and long-term investors, such as pension funds and insurance companies and sovereign wealth funds,' said Chaudhary in the response.
The central government had accrued Rs 1.29 trillion in LTCG tax revenue during financial year 2024-2025, nearly doubling from the Rs 72,249 crore it earned a year earlier, with data on financial years 2025-2026 and 2026-2027 pending filing.
Tax rates, including capital gains taxes, are periodically reviewed as part of annual budgeting processes after macro considerations, said Chaudhary in the response.
-- Shilpa Rangarajan, Business Standard
