Decision on LTCG tax rates likely soon; government is considering the matter—announcement expected in the coming weeks, according to a report..

There is significant discussion in the stock market regarding the Long-Term Capital Gains (LTCG) tax, with speculation that the government may provide major relief on this front. According to a report by Moneycontrol, sources familiar with the matter—including an official—have indicated that the government may decide to restructure the Long-Term Capital Gains (LTCG) tax on equities in the coming weeks, ahead of the budget.

The LTCG tax on the sale of equities by foreign and domestic investors is currently 12.5%, without the benefit of indexation. This tax applies to gains exceeding ₹1.25 lakh per financial year on listed shares. No such threshold applies to the sale of unlisted shares.

What did the sources say?
Speaking on the condition of anonymity, an official stated, "A decision regarding the restructuring is expected soon. The government is reviewing the LTCG tax rate by comparing it with the rates applicable in other major economies." In taxation, the 'indexation benefit' is used to adjust the purchase price of an asset to account for inflation over time.

A senior banking official familiar with the matter remarked, "There is an understanding within the government that the tax structure needs to be reviewed to enhance the competitiveness of Indian equities and make them more attractive to foreign investors. The government is considering various proposals, including those related to the LTCG tax."

According to sources, the government is also exploring whether the LTCG tax for foreign investors should be calculated based on gains measured in dollar terms. Currently, capital gains are calculated in rupee terms.

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