In a significant announcement, the Finance Ministry has categorically ruled out any plans to abolish the Long-Term Capital Gains (LTCG) tax, despite recent market downturns that saw investors losing over Rs 74 lakh crore. Minister of State for Finance, Pankaj Chaudhary, made this clarification in a written response to the Rajya Sabha on Tuesday.
No Proposal to Abolish LTCG Tax
Chaudhary stated, "No proposal to abolish long-term capital gains tax is currently under the consideration of the Government." As per the existing taxation framework, LTCG is levied at 12.5% on gains exceeding Rs 1.25 lakh from the sale of listed equity shares and units of equity-oriented mutual funds.
The Union Budget 2024-25 introduced key changes aimed at rationalizing and simplifying the LTCG tax structure. These changes include modifications to holding periods and tax rates applicable to different financial and non-financial capital assets, reflecting the government's intent to streamline taxation without eliminating the levy altogether.
Market Cap Decline Amid Bearish Trends
Addressing concerns about recent stock market performance, Chaudhary highlighted that benchmark indices - NSE NIFTY-50 and BSE Sensex - had shown consistent growth until September 2024, reaching record highs. However, since October 1, 2024, a bearish phase has prevailed, leading to a substantial decline in market capitalization.
"The market capitalization of all companies listed on NSE and BSE has reduced by around Rs 74 lakh crore from October 1, 2024, to March 18, 2025," he noted. Despite this dip, the long-term outlook for Indian stock markets remains robust. Chaudhary pointed out that since its inception in 1996, the NIFTY-50 index has delivered a compounded annual growth rate (CAGR) of 11.13%, reinforcing confidence in the market's long-term potential.
He further attributed stock market fluctuations to various factors, including investor sentiment, global geopolitical events, foreign capital flows, domestic macroeconomic indicators, and corporate performance.
SEBI's Crackdown on Stock Market Frauds
In response to a separate question, Chaudhary disclosed data on stock trading frauds under the Securities and Exchange Board of India (SEBI) Act, 1992. Between FY20 and FY24, a total of 6,717 cases of violations were recorded under SEBI's regulatory framework for fraudulent and unfair trade practices, as well as insider trading.
To combat market malpractices, SEBI has issued disgorgement orders totaling over Rs 1,083 crore in the past five years. The regulator continues to monitor the securities market through robust surveillance mechanisms designed to detect insider trading and price manipulation. SEBI also collaborates with stock exchanges and depositories to conduct investor awareness and education programs across the country, ensuring market stability and integrity.
Conclusion
The Finance Ministry's reaffirmation of LTCG tax underscores the government's commitment to fiscal discipline despite market volatility. While the recent downturn has impacted investors, historical data suggests that long-term investments in Indian equities remain a reliable avenue for wealth creation. At the same time, SEBI's vigilance in tackling stock market frauds reinforces a secure and transparent trading environment for investors.
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