AAP Rajya Sabha MP Raghav Chadha has urged the Central Government to abolish Long-Term Capital Gains (LTCG) tax on equity investments for individual investors, stating that the current tax structure discourages long-term savings and penalises genuine investors.
In a video statement shared on social media, Chadha said his demand is rooted in the need to promote long-term investing, boost household wealth and reduce excessive speculation in financial markets.
Supports STT Hike on Derivatives to Curb Speculation
Welcoming the recent increase in Securities Transaction Tax (STT) on derivatives, Chadha said the move could help rein in reckless speculation in futures and options (F&O) trading.
He pointed out that nearly 90% of retail investors lose money in F&O, turning segments of the stock market into what he described as "gambling platforms" rather than instruments of wealth creation.
STT Was Introduced When LTCG on Equities Was Zero
Highlighting the historical context, Chadha noted that when STT was first introduced, LTCG tax on equities was nil. The rationale was to simplify tax administration while encouraging equity participation.
"Today, investors are burdened with both STT and LTCG tax, which disincentivises long-term investing," he said, calling for a reassessment of the policy framework.
Global Examples: Switzerland, Singapore, UAE
The MP cited global best practices, pointing out that countries such as Switzerland, Singapore and the UAE do not levy long-term capital gains tax on equity investments for individuals.
According to Chadha, adopting a similar approach in India would:
- Encourage long-term equity investments
- Reduce speculative trading behaviour
- Shift household savings from gold and real estate to equities
- Strengthen capital formation and economic growth
LTCG Tax Remains a Key Investor Concern
Despite expectations ahead of the Union Budget, the LTCG tax on equities remains unchanged, even as STT on derivatives has been increased. This has reignited debate over whether India's tax policy truly rewards long-term investors.
Currently, LTCG tax applies to equity gains above the prescribed exemption limit, making tax efficiency a growing concern for retail investors and financial planners alike.
Call for Policy Alignment with Wealth Creation Goals
Raghav Chadha concluded by urging the government to align tax policy with long-term wealth creation objectives, arguing that removing LTCG tax on equities for individuals would create a healthier investment ecosystem and deepen India's capital markets.
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