Government Says No Proposal to Scrap LTCG Tax on Equity Investments

The government has clarified that there is currently no proposal under consideration to abolish Long Term Capital Gains (LTCG) tax on equity investments. The statement was made in the Lok Sabha on July 20, 2026, by Minister of State for Finance Pankaj Chaudhary in response to a parliamentary question.

The clarification comes amid discussions around capital gains taxation and its impact on investors. The government also shared data on LTCG tax collections and addressed queries related to Foreign Portfolio Investors (FPIs).

Government Statement on LTCG Tax Removal

In a written reply in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary stated that there is no proposal currently under consideration to scrap LTCG tax on equity investments. The government said existing tax policies are reviewed periodically rather than changed outside the established policy framework.

According to the minister, tax rates and related provisions are examined as part of the annual Union Budget process. Any revisions are considered after evaluating prevailing macroeconomic parameters and legislative requirements.

Equity LTCG Tax Collections Cross ₹2 Lakh Crore

The Finance Ministry shared data highlighting the contribution of LTCG tax on equity transactions to government revenues. Collections from equity LTCG tax stood at ₹72,249 crore in AY 2024-25, corresponding to FY 2023-24.

The figure increased to ₹1.29 lakh crore in AY 2025-26, corresponding to FY 2024-25. Combined collections for these 2 assessment years exceeded ₹2 lakh crore, based on the figures provided by the government.

Finance Ministry Clarifies FPI and Retail Investor Tax Treatment

Responding to concerns over whether FPIs receive preferential treatment, the government stated that the LTCG tax rate on equity investments is the same for FPIs, domestic investors, and retail investors. The ministry clarified that the applicable LTCG tax rate on equity investments remains 12.5% across these investor categories.

This clarification was provided to address questions regarding differences in taxation between foreign and domestic market participants. The government emphasised that equity LTCG taxation continues to apply uniformly under the existing framework.

FPI Tax Exemption Applies Only to Government Securities

The Finance Ministry explained that the Income-tax (Amendment) Ordinance, 2026 introduced changes only for FPI investments in Government Securities (G-Secs). Under the revised provisions, interest income or capital gains arising from investments in G-Secs from April 1, 2026, are eligible for the specified exemption.

According to the government, the measure aims to align the taxation of G-Secs with comparable international jurisdictions. The policy is also intended to attract stable foreign capital from long-term investors such as pension funds, insurance companies, and sovereign wealth funds.

Read More: Know the Penalties That Taxpayers Can Avoid.

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Conclusion

The government has reiterated that there is no proposal at present to eliminate LTCG tax on equity investments for retail or domestic investors. It also clarified that FPIs, domestic investors, and retail investors are subject to the same 12.5% LTCG tax rate on equities.

Data shared by the Finance Ministry showed equity LTCG tax collections exceeding ₹2 lakh crore across AY 2024-25 and AY 2025-26. The government added that capital gains tax policies will continue to be reviewed periodically through the Budget process and legislative revisions based on macroeconomic considerations.

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