- The Indian government ruled out tax breaks for domestic equity investors, maintaining the current twelve point five percent rate.
- Minister Pankaj Chaudhary confirmed no proposal exists to reduce long-term capital gains on listed shares and mutual funds.
- Equity tax collections surged seventy-nine percent to one hundred twenty-nine thousand one hundred fifty-eight crore rupees in assessment year twenty twenty-six.
The Indian government has ruled out a tax break for domestic equity investors, keeping the 12.5% LTCG rate on listed shares and equity-oriented mutual funds for gains above ₹1.25 lakh in a financial year.
Minister of State for Finance Pankaj Chaudhary gave the clarification in a written Lok Sabha reply on July 20, 2026. He was responding to a question from Samajwadi Party MP Anand Bhadauria.
The government said there is currently no proposal to scrap or reduce the tax on long-term equity gains. The policy review process continues through annual budgets and legislative changes.
Free toolCSPA Age-Out Calculator OnlineChaudhary said the rate for domestic and retail investors matches the rate applied to foreign portfolio investors on equity investments. The recent relief for foreign investors covers government securities, not shares.
"At present, there is no such proposal under consideration. The tax policies, including capital gains tax rates, are reviewed periodically as part of the annual budgetary process and legislative revisions after taking into consideration the macro-economic parameters."
The reply comes after investors sought tax parity with foreign portfolio investors. Retail investors and market participants argued that exempting some foreign debt investments while taxing domestic equity created an uneven playing field.
The equity tax rules remain unchanged
Listed equity shares and equity-oriented mutual funds qualify for long-term treatment after a holding period of more than 12 months. Gains above ₹1.25 lakh in a financial year face a 12.5% tax rate.
Short-term gains face a higher rate. Equity held for 12 months or less is taxed at 20%.
The government raised the long-term rate from 10% to 12.5% in 2024. The latest parliamentary reply leaves that structure intact for domestic investors.
| Investment treatment | Current rule |
|---|---|
| Long-term equity holding | More than 12 months |
| Long-term equity gains | 12.5% above ₹1.25 lakh per financial year |
| Short-term equity holding | 12 months or less |
| Short-term equity gains | 20% |
The distinction applies to listed equity and equity-oriented mutual funds. The government’s clarification addresses domestic and retail investors rather than announcing a new equity tax measure.
The foreign-investor relief covers G-Secs only
Last month, the government promulgated the Income-tax (Amendment) Ordinance, 2026. The measure exempts foreign portfolio investors from tax on interest income and capital gains from government securities.
The exemption took effect on April 1, 2026. It does not extend to equity investments.
Chaudhary said the government introduced the G-Sec treatment to "align India’s taxation of government securities with many comparable jurisdictions" and attract stable, long-term global capital from pension funds and sovereign wealth funds.
The change therefore creates different treatment by asset class. Foreign portfolio investors receive the relief for government debt, while the equity tax remains in place for domestic investors and foreign investors alike.
Equity tax collections climbed to ₹1,29,158 crore
The government’s response also showed a sharp rise in equity LTCG collections. For assessment year 2025-26, collections reached ₹1,29,158 crore.
The previous figure was ₹72,249 crore for assessment year 2024-25. Collections rose by nearly 79% year on year.
More than ₹2.01 lakh crore came in across the two assessment years. The figures include the period after the rate increased from 10% to 12.5% in 2024.
Richa Sawhney, a partner at Grant Thornton Bharat, attributed the increase to strong market performance in earlier years and "record retail participation," rather than only to the rate change.
The assessment-year figures provide the fiscal backdrop to the government’s decision to maintain the current framework. The reply did not announce a new relief threshold or a revised rate.
Investors face the decision during a weaker 2026 market
The clarification arrived as Indian equities have struggled in 2026. The Nifty 50 has lost approximately 7.2% so far this year.
Bhadauria cited the market’s "worst two-year performance" in his parliamentary question. Investors had sought relief while questioning why foreign capital received a tax concession in government securities.
Foreign portfolio investors have sold approximately $28.03 billion of Indian equities so far in 2026. High crude prices and a weakening rupee have contributed to the outflows.
Some market experts said the decision could weigh on sentiment. They also described the government’s clarity and policy predictability as useful for longer-term planning because immediate speculation about a rollback has ended.
The government’s position leaves future changes within the annual budget process. Chaudhary said tax policies and capital gains rates are reviewed periodically.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA about your specific situation.
