No proposal to scrap LTCG tax on equities, Pg15

Key Highlights:

• The Finance Ministry has stated there is no proposal to scrap Long-Term Capital Gains (LTCG) tax on equities for domestic investors.
• This clarification was made in Parliament on Monday, despite recent easing of tax rules for some Foreign Portfolio Investors (FPIs) in government debt.
• The government recently exempted FPIs from LTCG tax on investments in Government Securities (G-Secs), effective April 1, 2026.
• FPIs sold approximately $28.03 billion worth of Indian equities in 2026, influenced by elevated crude prices and a depreciating rupee.
• The LTCG tax on equity transactions generated ₹1.29 lakh crore in Assessment Year 2025-26 (Financial Year 2024-25).

Detailed Insights:

• The current LTCG tax rate on listed equities for domestic investors is 12.5% on gains exceeding ₹1.25 lakh in a financial year.
• The exemption for FPIs applies specifically to income tax on interest or capital gains from Government Securities (G-Secs).
• This move aims to attract global capital and align India's tax treatment of G-Secs with comparable international jurisdictions.
• The tax rate of 12.5% on LTCG for equity investments remains the same for both domestic investors and FPIs.
• The Income-tax (Amendment) Ordinance, 2026, rationalized the tax treatment for FPIs in G-Secs.
• Tax policies, including capital gains tax rates, are periodically reviewed as part of the annual budgetary process.

Key Concepts Involved:

• Long-Term Capital Gains (LTCG) Tax: A tax levied on profits from the sale of assets held for more than a specified period, typically one year for equities.
• Foreign Portfolio Investors (FPIs): Non-resident entities or individuals investing in a country's financial assets like stocks and bonds without gaining direct ownership or control.
• Government Securities (G-Secs): Debt instruments issued by the government to borrow money from the public, considered low-risk investments.