Raghav Chadha, AAP MP, Calls For Abolishing LTCG

Rajya Sabha MP Raghav Chadha has made a demand that the government abolish the LTCG on equities for individual investors. The demand comes in lieu of the Finance Minister Nirmala Sitharaman announcing an increase in Securities Transaction Tax (STT) on futures and options trading in the Union Budget 2026-2027.

In a post on X, Chadha said that while he is in favor of the increase in STT on derivatives to rein in speculation, keeping both STT and LTCG can impact equity investing. He pointed out that when STT was first introduced, the long-term capital gains tax was zero. He also pointed out that Switzerland, Singapore, and the UAE have scrapped capital gains tax on equities to encourage broader retail participation.

Current LTCG Rules On Equity Investments

At present, LTCG on listed equity shares and equity mutual funds are taxed at 12.5 per cent on gains exceeding Rs 1.25 lakh in a financial year when held for more than 12 months (which makes it long-term).

Gains up to Rs 1.25 lakh remain tax-free. The tax is thus calculated on absolute gains since indexation benefits are not available. For example, if your LTCG is Rs 2 lakh tax at 12.5 per cent will apply only on Rs 75,000. This applies uniformly to direct equities and equity mutual funds.

The LTCG was introduced in Budget 2018 with a tax of 10 per cent on gains of Rs 1 lakh. In 2024, this was changed to 12.5 per cent with a threshold of Rs 1.25 lakh. Indexation now remains unavailable.

What This Would Mean 

“Eliminating the LTCG tax on equities would provide a powerful catalyst for India’s capital markets. By removing the tax friction on long-term holdings, the government can directly facilitate sustainable wealth generation for retail investors while curbing speculative, short-term volatility,” says Ankit Jain, partner, Ved Jain and Associates.

However, this may not be feasible. A strategic middle ground would be the introduction of an "Ultra-Long Term Capital Gains" category. “By exempting equities held for three years or more, the tax code would effectively reward patient capital, aligning individual financial goals with the broader objective of stable, long-term national economic growth,” says Jain.