Sitharaman signals openness to views on removing equity long-term capital gains tax

Union Finance Minister Nirmala Sitharaman stated on Tuesday that the government remains receptive to hearing proposals concerning the elimination of long-term capital gains tax on equity investments. Addressing an audience at the Bloomberg New Economy Forum in New Delhi, the minister noted that domestic and international market participants have actively raised questions regarding capital gains structures.

The remarks arrive as policymakers initiate preparations for the upcoming Union Budget. Financial market participants have closely scrutinized equity taxation frameworks, particularly following heavy capital outflows by foreign portfolio investors. Industry analysts indicate that any potential recalibration of the levy could significantly influence domestic liquidity and foreign participation trends.

Sitharaman observed that commentary surrounding the long-term capital gains levy has intensified among both local and overseas investors. Alongside capital gains, she pointed out that discussions extend to the securities transaction tax and whether various asset classes ought to face uniform tax treatment. She characterized these ongoing discussions as a healthy part of economic dialogue.

While declining to provide explicit commitments on specific tax modifications, the minister emphasized caution as the budget formulation cycle advances. She explained that because budget exercises are underway, prematurely detailing adjustments or inclusions would be unfeasible.

The dialogue follows recent policy submissions by institutional analysts. SBI Research recently recommended abolishing the long-term capital gains tax on equities while extending the minimum investment holding period to two or three years. The proposal aimed to anchor stable capital flows and counteract short-term market volatility.

Foreign portfolio investors offloaded Indian equities totaling ₹3.04 lakh crore through the year up to October, with October alone accounting for ₹44,166 crore in net withdrawals. The current long-term capital gains tax rate on listed shares and equity mutual funds stands at 12.5 percent, a level retained during the previous budget following revisions enacted in 2024.

Stakeholder consultations will continue through the winter months as the Ministry of Finance reviews revenue projections and economic indicators. Formal decisions regarding tax structures and holding periods will materialize when the Union Budget is presented in Parliament.