India's tax revenue from long-term capital gains on equities surged to ₹1.29 lakh crore for the 2025-26 assessment year. This sharp rise from ₹72,249 crore the previous year reflects increased stock market activity and the implementation of revised tax rates introduced in the 2024 Union Budget.
The Indian government has reported a significant jump in tax revenue collected from long-term capital gains (LTCG) on equity investments. Data disclosed in parliament shows that collections reached ₹1.29 lakh crore for the Assessment Year (AY) 2025-26, compared to ₹72,249 crore in AY 2024-25. This represents a growth of approximately 79%, highlighting both the surge in stock market participation and the impact of policy changes introduced in the Union Budget 2024.
Impact of Tax Policy Changes
The revenue figures for AY 2025-26 correspond to income earned by investors during the 2024-25 financial year. A major driver for this collection is the revision in the tax framework implemented on July 23, 2024. Under these current rules, long-term capital gains—profits from selling listed equity shares or equity-oriented mutual funds held for at least 12 months—are taxed at a rate of 12.5%. This shift replaced previous structures and removed the benefit of indexation, which previously allowed investors to adjust their purchase price for inflation.
Market Participation and Revenue Trends
The 79% increase in tax collections is closely linked to the record-high trading volumes and new investor accounts opened during the 2024-25 period. As the number of retail and institutional participants grew, the volume of equity transactions increased significantly, leading to higher tax accruals for the exchequer. While the higher tax rate of 12.5% contributed to the total collection, the underlying growth in trading activity remained a primary factor in the year-over-year revenue climb.
What This Means for Investors
For individual investors, these figures illustrate the changing cost of staying invested in the equity markets. The removal of indexation benefits, combined with the 12.5% tax rate, means that a larger portion of absolute gains is now subject to tax compared to previous years. Investors may need to account for this 12.5% tax obligation when calculating their net returns on long-term equity holdings. Moving forward, the government's future budget announcements and any potential adjustments to tax slabs or capital gains exemptions will be important for investors to monitor, as these policies directly impact the take-home returns from equity portfolios.