New Delhi: The government is not considering any proposal to scrap Long Term Capital Gains (LTCG) tax for domestic or retail investors, MoS Finance Pankaj Chaudhary told the Lok Sabha on Monday. The government has recently removed the LTCG tax on capital gains from investments made by foreign investors in government securities.

"At present, there is no such proposal under consideration," Chaudhary, Minister of State for Finance, said in reply to a question on whether the government would scrap LTCG for retail/domestic investors to revive market sentiment, protect domestic investors and ensure a level-playing field between foreign and Indian investors.

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"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," he said.

The tax rate of 12.5 per cent on LTCG for domestic and retail investors is the same as that for FPIs (foreign portfolio investors) on returns on their investments in equities.

Through the Income-tax (Amendment) Ordinance, 2026, promulgated last month, the government has rationalised the tax treatment applicable to investments by FPIs only in government securities (G-Secs), by exempting such investments from income tax on any interest or capital gain.

The exemption is applicable with effect from April 1, 2026, he said, adding that the exemption will apply to any interest or capital gains arising to FPIs on or after April 1, 2026 in respect of investments in G-Secs.

Additionally, this amendment was brought in recognising the importance of a competitive tax regime in attracting global capital, he said.

The government decided to rationalise the tax treatment applicable to investments by FPIs in government securities, by exempting such investments from income tax on any interest or capital gain, he said.

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This step will align the taxation on G-Secs with many comparable jurisdictions, he said, adding, this will ensure stable, systematic inflow of durable, patient foreign capital and long-term investors such as pension funds, insurance companies, and sovereign wealth funds (SWFs).

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