LTCG tax on equities: Govt may restructure rates in coming weeks; how much could investors save at 10%, 5% or 2%?

The government is considering changes to the long-term capital gains tax on equities before Budget 2027. Here is the current 12.5% LTCG rate, why a cut is being discussed, and how much investors could save at 10%, 5% or 2% on gains of ₹2 lakh, assuming the ₹1.25 lakh exemption stays.

The government is considering changes to the long-term capital gains (LTCG) tax on equities. A decision might be taken in the coming weeks before the Union Budget in February 2027, Moneycontrol reported on Monday, citing sources familiar with the matter, including a government official.

“A decision on restructuring is expected soon,” an official told Moneycontrol. The official added that the government is comparing India’s LTCG tax rate with those prevailing in major economies.

The report also mentioned that the government is examining whether LTCG paid by foreign investors should be calculated on gains made in dollar terms. Currently, capital gains are calculated in rupees.

A reduction in the tax rate could lower investors’ tax liability when they sell equity investments at a profit. Here is what investors need to know.

What is the current LTCG tax on equities?

Currently, profits from listed equity shares and equity-oriented mutual funds are treated as long-term capital gains if held for more than 12 months.

Investors pay LTCG tax at 12.5% on eligible gains exceeding ₹1.25 lakh in a financial year. Applicable cess and surcharge are levied separately.

What is the context of considering an LTCG tax cut?

In its Ecowrap report dated 12 October 2026, SBI Research suggested that, “The government must seriously look into anchoring hot money flows into the equity segment by extending the holding period to say 2-3 years and abolishing the long-term capital gains tax for equity.”