New Delhi: The Union government is considering a restructuring of the long-term capital gains (LTCG) tax on equities, including a possible cut from the current 12.5 per cent, ahead of the Union Budget 2027-28, according to sources including a government official who spoke to ANI. No final decision has been taken, and officials said any move would follow consultations with stakeholders.
Source: ANI via Daily Prabhat
A second proposal under examination would let foreign portfolio investors (FPIs) calculate their capital gains in dollar terms rather than in rupees. Under the present system, an overseas investor can owe tax on a rupee gain even when currency depreciation has wiped out the return in dollars — for example, shares bought for $1,000 at Rs 80 to the dollar (Rs 80,000) that rise 10 per cent while the rupee slips to Rs 88 would be worth Rs 88,000, showing a taxable rupee gain despite no gain in dollar terms.
Source: The Indian Express via Madhyamam
"The government is examining the LTCG rate with what is applicable in major economies," sources told ANI, adding that discussions with stakeholders are under way. Moneycontrol has separately reported that the Centre has held meetings with industry representatives, the Securities and Exchange Board of India (SEBI), the Central Board of Direct Taxes (CBDT) and banks on the framework, and a senior banking official said there is a recognition within government that the tax structure needs to be reviewed to improve the competitiveness of Indian equities.
Source: Moneycontrol via 7Globe
Why the rethink
The discussions follow two years of weak or negative stock market returns, sluggish wage growth and a sharp rise in retail participation. Demat accounts with Central Depository Services (India) Ltd rose from 2.12 crore in March 2020 to 19.34 crore in September 2026, while retail shareholding in NSE-listed companies slipped from 7.66 per cent in June 2024 to 7.12 per cent in March 2026. FPIs have withdrawn Rs 3.08 lakh crore from Indian equities in 2026 — yaani just over Rs 3 lakh crore, roughly Rs 3 trillion — against Rs 1.66 lakh crore in all of 2025, and officials are concerned that domestic mutual fund inflows may no longer be enough to offset those outflows.
Source: The Indian Express via EcoNiti
This is a proposal under examination, not a Budget announcement. LTCG on listed equities was reintroduced in 2018 at 10 per cent on annual gains above Rs 1 lakh and now stands at 12.5 per cent. Finance Minister Nirmala Sitharaman earlier this month called the debate over LTCG healthy, according to reports. Any change would be announced in the Budget.