India capital gains tax and securities transaction levies are being reassessed, with the government seeking views from investors, market participants and tax experts, people familiar with the matter said. The review comes amid foreign portfolio investor outflows from equities, but no change to the rules has been announced.

Key Takeaways

  • Long-term gains on stocks held for more than 12 months are currently taxed at 12.5% for domestic and foreign portfolio investors.
  • Market participants have questioned the simultaneous application of capital gains tax and securities transaction tax.
  • Any decision would need to weigh investor concerns against the revenue collected from the levies.

India capital gains tax and the current levies

The current long-term capital gains tax rate on stocks held for more than 12 months is 12.5% for both domestic and foreign portfolio investors. With cess and surcharges, the rate can come to nearly 15%.

Equity transactions also face securities transaction tax, or STT, of 0.1% each on the buyer and seller, as well as stamp duty of 0.015% on the buyer. Some market participants have described the combination of capital gains tax and STT as double taxation.

India removed long-term capital gains tax and withholding tax on interest earned on government securities held by foreign portfolio investors in June 2026. That measure raised hopes among some market participants of relief for equities, but it did not establish a change to equity taxes.

Budget review weighs investor concerns and revenue

Finance Minister Nirmala Sitharaman addressed questions about the levies at an event in New Delhi on October 13, 2026. She said there was considerable debate and that budget preparations had begun, but declined to say what she would or would not consider.

The people familiar with the review said any decision would need to account for the revenue impact, alongside higher fertiliser subsidy bills and funding for social programmes. Total long-term capital gains tax collections were Rs 1.29 lakh crore in FY25, while STT collections were Rs 57,522 crore in FY26.

Tax practitioners have suggested various approaches. KPMG senior adviser Sudhir Kapadia proposed removing capital gains tax for foreign portfolio investors while increasing STT. Pratik Jain, a partner at Price Waterhouse & Co. LLP, suggested options including a zero long-term capital gains rate for longer holding periods or allowing STT to be offset against capital gains tax. These are suggestions, not government decisions.

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