Government Says No Proposal to Scrap Long-Term Capital Gains Tax on Equities

The central government has said that there is no plan to abolish the long-term capital gains tax (LTCG) on equity investments and has put to rest speculation that it could be changed soon.

All this is about capital gains taxation on listed equity shares and equity-oriented mutual funds. As the government has not received any proposal to abolish the existing LTCG tax, we will continue to have this arrangement unless it is made official in the future policy announcement.

The LTCG tax is applicable to profits from the sale of listed equity shares and equity-oriented mutual funds held for more than one year. The tax has been one of the most important components of India's capital gains taxation system since it was adopted in the budget for 2018 in the Union Budget after being out of the loop for several years.

The clarification is of great interest to investors as there was speculation in different parts of the market that the tax may be rolled back in order to promote more participation in equity markets. But in the latest statement, there is no such plan.

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For retail and institutional investors, this means the existing tax rules still apply. Investors should therefore continue to factor LTCG tax into their investment and financial planning decisions. Any future change to capital gains taxation would typically be announced through the Union Budget or official notifications from the Ministry of Finance.

India’s stock markets have witnessed high participation from retail investors in the last few years as mutual funds and SIPs, as well as direct stock investment, have gained popularity. While market participants often ask for tax relief measures to spur investment activity, the government has stressed that it has no plan to change the LTCG tax structure.

Financial experts advise investors not to rely on rumours or unverified reports about tax policy changes. Instead, they should monitor official government announcements and Budget proposals before making investment decisions based on anticipated tax reforms.

With the latest clarification from the government, investors can expect continuity in the current capital gains tax framework. Without any formal proposal in the future, the Long-Term Capital Gains tax on equities and equity mutual funds will not change.