Recent benchmark receipts of Rs 1.3 lakh crore in FY25 are expected to fall steeply to Rs 40,000–50,000 crore by FY27 as cumulative foreign portfolio outflows reach Rs 4.8 lakh crore. To cushion the impact of full repeal, SBI Research outlined phased alternatives, including a tiered tax structure scaling down to zero for assets held past three years. The proposal also suggests permitting mutual fund investors to defer capital gains liabilities if they reinvest redemptions within 90 days. Furthermore, an accompanying hike in transaction levies could entirely replace lost proceeds.
Key points
Anticipated revenue losses from ending the levy are substantially lower than past collect…: Anticipated revenue losses from ending the levy are substantially lower than past collections suggested.
Higher transaction taxes on equity delivery, futures, and options can fully offset the re…: Higher transaction taxes on equity delivery, futures, and options can fully offset the resulting fiscal impact.
Government reviews and market regulator recommendations have put capital gains relief und…: Government reviews and market regulator recommendations have put capital gains relief under active policy consideration.
Sources checked by our analysis pipeline: 1
The estimate is significantly below the Rs 1.3 lakh crore collected in FY25, a year when the stock market had delivered returns of around 30%. SBI Research said using that figure as the benchmark for the potential revenue loss from abolishing LTCG would be misleading.
“Thus, it is incorrect to say that the Government is going to lose Rs 1.3 lakh crore of revenue from capital gains tax,” the report said.
SBI Research estimates that LTCG collections would have been around ₹1 lakh crore in FY26 and may fall to Rs 40,000–50,000 crore in FY27, amid weaker market returns and sustained foreign investor outflows. The three-year average Nifty return between FY25 and FY27 so far is just 0.5%, while cumulative FII outflows have reached ₹4.8 lakh crore, according to the report.
“Even if we assume that if the Government decides to abolish LTCG tax, the shortfall for FY28 will be only in the range of Rs 40,000–50,000 crore,” SBI Research said.
That would amount to roughly 0.1%-0.2% of GDP, a hit the government could potentially absorb, the report said. “We…
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