12.5% LTCG Tax on Stocks: What You Still Owe

The government clarified that the 12.5% long-term capital gains tax on equity applies equally to both foreign and Indian investors. A recent ordinance only exempted FPIs on government bonds — your stock market gains are taxed as before.

Here's what happened: The Income-tax Ordinance 2026 granted a tax exemption to Foreign Portfolio Investors (FPIs) only on gains from Government Securities (G-Secs), not equity.. Both domestic investors and FPIs continue to pay 12.5% LTCG tax on equity held for more than 12 months, with no new exemption announced.. Confusion arose after the ordinance was issued, with some reports suggesting FPIs got a broader equity tax break — the Centre has now formally clarified this is not the case..

What you should do: Calculate your LTCG exposure: if your equity mutual fund or stock gains exceed ₹1.25 lakh this financial year, set aside 12.5% of the surplus for tax now — don't wait till ITR filing.. Review your equity redemption timing: gains up to ₹1.25 lakh per year are tax-free under LTCG rules, so stagger large redemptions across financial years to stay under this threshold.. If you hold debt mutual funds or G-Secs directly, check whether the new ordinance changes your tax treatment — consult a tax advisor for your specific portfolio mix..

Pro tip: The ₹1.25 lakh LTCG exemption limit resets every April 1. If your unrealised equity gains are large, consider booking partial profits before March 31 each year to use the exemption and then reinvest — this strategy is called 'tax harvesting' and can save you thousands annually.