Archive · 20 Jul 2026
Govt Rejects LTCG Tax Abolition on Equities
The Indian government has decided not to remove the 12.5% Long-Term Capital Gains (LTCG) tax on equities.
This tax is applied to profits from selling shares held for more than a year, after an initial exemption of ₹1.25 lakh.
Investors wanted this tax removed, arguing it leads to double taxation when combined with the Securities Transaction Tax (STT).
However, the government believes keeping the tax ensures fair treatment across different investments and provides important revenue for the country.
For most small investors, the tax doesn't apply because their profits are below the exemption threshold.
This decision means no immediate tax cuts for investors, but the current system remains manageable for most.
Indian government confirms no plans to abolish 12.5% LTCG tax on equities.
Investors argue double taxation due to STT and LTCG tax.
Government prioritizes fiscal revenue and horizontal equity across investment classes.
Initial ₹1.25 lakh of annual profit is tax-exempt, benefiting small investors.
Decision maintains current tax structure, impacting long-term investment strategies.
- Who
- Indian government and retail investors
- What
- Rejection of demands to abolish LTCG tax on equities
- When
- Confirmed via a written reply in Parliament
- Where
- India
- Why
- To maintain fiscal revenue and ensure horizontal equity across investment classes
Investors' Perspective
Government's Perspective
Taxation Fairness
Investors' Perspective
Investors argue that the 12.5% LTCG tax, combined with STT, results in double taxation, which is unfair and discourages long-term investment.
Government's Perspective
The government emphasizes 'horizontal equity,' ensuring similar taxation across different investment classes like real estate, gold, and mutual funds to maintain market balance.
Revenue Impact
Investors' Perspective
Investors believe reducing or abolishing LTCG tax could boost market participation and long-term capital deployment.
Government's Perspective
The government views LTCG tax as a crucial revenue source for public spending and infrastructure development, and its removal could create a significant fiscal deficit.
- Current LTCG Tax Rate
- 12.5%
- Tax Exemption Threshold
- ₹1.25 lakh per financial year
- STT
- Securities Transaction Tax paid on buying/selling shares
- Horizontal Equity
- Equal taxation across different investment classes
- Primary Revenue Source
- Capital gains tax for public spending
