Government Collects Rs 1.29 Lakh Crore From Equity LTCG Tax in FY25, Up 79% YoY

The Indian government collected Rs 1,29,158 crore in Long-Term Capital Gains (LTCG) Tax from equity transactions in FY25, registering a 78.8 per cent increase from Rs 72,249 crore in FY24. The figures, disclosed by the Finance Ministry in Parliament on July 20, 2026, indicate a significant rise in tax revenue from stock market investments. The government also clarified that there is no proposal under consideration to abolish LTCG tax on equities.

The LTCG tax collection increased by Rs 56,909 crore year-on-year in FY25. Over FY24 and FY25, the government collected a combined Rs 2,01,407 crore from LTCG tax on equity transactions. These figures relate specifically to long-term capital gains from equity investments and do not include capital gains tax collected from other asset classes such as property and gold. Data for FY26 and FY27 were not available in the July 2026 parliamentary disclosure.

Under the existing tax provisions, gains from listed equity shares and equity-oriented Mutual Funds held for more than 12 months are classified as long-term capital gains. For eligible transactions executed on or after July 23, 2024, LTCG exceeding Rs 1.25 lakh in a financial year is taxed at 12.5 per cent, excluding applicable surcharge and cess. Before the amendment, the tax rate was 10 per cent on gains exceeding Rs 1 lakh annually.

For instance, if an investor earns Rs 3 lakh in eligible long-term capital gains from equity investments during a financial year, Rs 1.75 lakh would be taxable after considering the annual exemption limit of Rs 1.25 lakh. At the applicable rate of 12.5 per cent, the tax liability would be Rs 21,875 before cess and any applicable surcharge. The tax is levied only when investments are sold and gains are realised, not on the increase in the market value of shares that investors continue to hold.

Responding to a question in Parliament, the Finance Ministry clarified that there is no proposal to abolish LTCG tax on equity investments as of July 20, 2026. It also stated that the 12.5 per cent LTCG tax rate applies to both domestic investors and foreign portfolio investors (FPIs) on equity investments covered under the applicable tax regime.

However, a separate tax exemption introduced in 2026 will apply to certain income earned by FPIs from Indian government securities with effect from April 1, 2026. This exemption does not extend to capital gains from equity investments.

The nearly 79 per cent increase in LTCG tax collections reflects higher tax revenues from equity investments. However, the rise in collections does not necessarily indicate a similar increase in stock market returns, as tax revenue depends on realised profits, transaction volumes, applicable tax rates and the timing of investment sales.

For retail investors, LTCG taxation remains an important factor in determining post-tax investment returns. The government's collection of Rs 2,01,407 crore over FY24 and FY25 also highlights the revenue significance of equity capital gains taxation. Any future changes in tax rates or exemption limits could therefore affect both government revenue and investors' post-tax returns.

Disclaimer: The article is for informational purposes only and not investment advice.