For years now, long term investors in the stock market have been pushing hard for one big change: scrapping the long term capital gains, or LTCG, tax on equities. Their argument is that removing it would make the market calmer and steadier, because people would park their money for the long haul instead of booking quick profits and rushing back out. Many also believe that ending the levy would pull far more foreign capital into domestic markets. On Monday, though, the government put a firm lid on those hopes, telling Parliament that it has no such proposal in front of it.
The Question Raised in Parliament
The issue came up in the Lok Sabha on July 20. The question was whether the government was planning to withdraw the LTCG tax for retail and domestic investors. In a written reply, Minister of State for Finance Pankaj Chaudhary said that no proposal to remove the tax, even for the purpose of strengthening market sentiment and drawing in domestic and foreign investors, was under review. He put it bluntly: "No such proposal is currently under consideration."
How Much the Tax Is, and When It Applies
Under the current rules, long term profits from listed shares and equity mutual funds attract LTCG tax at a rate of 12.5%. It does not, however, hit every investor. The tax kicks in only when your gains cross Rs 1.25 lakh in a single year. Another key point to understand is that earnings are counted as a long term capital gain only when an asset is held for more than a year before being sold.
Rates Are Not Set in Stone
The minister also made it clear that capital gains tax rates are not permanent. They are reviewed from time to time, keeping in mind the budget process and the country's economic situation. In other words, if the need is felt, the government can amend the law during the budget and revise these rates up or down. The figures the government shared also underline how important this tax has become. In assessment year 2025-26, collections from LTCG tax surged 78% to around Rs 1.29 lakh crore. Just a year earlier, that figure stood at Rs 72,249 crore.
Same Rule for Domestic and Foreign Investors
Chaudhary added that the 12.5% rate on shares applies equally to both Indian investors and foreign portfolio investors (FPIs), with no separate concession for anyone. There is, however, one big relief for foreign investors who put money into government bonds, or G-Secs. From April 1, 2026, the interest and capital gains earned on such investments will not attract income tax. The government believes this move will make India's tax system more competitive globally and help draw long term money from large foreign investors such as pension funds, insurance companies and sovereign wealth funds.
