Government Rules Out Scrapping LTCG Tax on Listed Equities, Says Collections Rose 78%

Parliament Clears the Air on LTCG Review 

The Centre has finally killed any hopes of the reversal of the long-term capital gains (LTCG) tax on listed equities. Replying to the questions raised in the Lok Sabha, the Minister of State for Finance, Pankaj Chaudhary, clarified that the government has no proposals under consideration to abolish or scrap the levy for retail and domestic investors. The ministry has also stressed that tax rates and structures are reviewed from time to time in the context of the overall budgetary cycle during the year and in accordance with the prevailing macroeconomic realities. Market participants have repeatedly called for relief to improve investor sentiment.

A Booming Source of Revenue for the Exchequer

Why the tax is here to stay was revealed in official data tabled in Parliament, showing collections on a massive, steady climb. The revenue from the LTCG tax on equity transactions shot up nearly 78% on-year to ₹1,29,158 crore in Assessment Year 2025-26 from ₹72,249 crore in the last assessment period. Currently, long-term capital gains arising from the sale of listed shares or equity mutual funds held for over 12 months are taxed at a flat rate of 12.5% on gains exceeding ₹1.25 lakh in a financial year.

How to Address Level Playing Field Concerns

The government also seized the opportunity to resolve the ongoing debates regarding parity between domestic retail participants and Foreign Portfolio Investors (FPIs). The officials cleared the confusion by saying that the 12.5% LTCG tax rate on equities is applicable for domestic investors as well as FPIs.