India’s long-running debate over taxation of equity investments has once again returned to the spotlight after veteran investor Vijay Kedia made a direct appeal to Finance Minister Nirmala Sitharaman and the Finance Ministry to abolish long-term capital gains (LTCG) tax on listed equities.
In a post on X, Kedia argued that abolishing LTCG tax on listed equities could become a powerful signal that India wants to reward patient capital and entrepreneurship.
“India needs more patient capital, more entrepreneurship and more long term investing. Abolishing long-term capital gains tax on listed equities would be a powerful step in that direction,” he said in the tweet.
The debate over LTCG tax has remained contentious ever since it was reintroduced on listed equities in 2018 after being exempt for over a decade. Supporters of the tax argue that capital gains represent income and should therefore be taxed to maintain fairness in the broader taxation system.
Kedia on current tax policy
According to him, current taxation frameworks often blur that line, even though the economic impact of both activities is fundamentally different. Short-term speculation revolves around price movements and trading activity, while long-term investing supports corporate growth, innovation and wealth creation over years or decades.
Kedia argued that investors who stay committed to businesses over long periods effectively become partners in nation-building because their capital allows companies to scale operations, hire employees and generate economic activity.
“Most importantly, tax policy should clearly distinguish between investment and speculation. A long term shareholder is a partner in wealth creation, not merely a participant in market transactions,” Kedia said.
Tax policy should reward long-term ownership of productive businesses and distinguish it from short-term speculation, he added.
He also pointed out that by the time investors eventually realise long-term capital gains, governments have often already collected significant taxes through multiple layers of economic activity generated by those businesses.
“The appreciation in a company’s value is not created in isolation. During its growth journey, the government already collects corporate tax, GST, income tax from employees, customs duties, stamp duties and numerous other levies. Long-term capital gains are often the final outcome of economic activity that has already generated substantial tax revenues,” he further highlighted.
‘Long term investors should not be treated as spectators’
Kedia further argued that long-term investors should not be treated as speculators because they play a critical role in funding businesses, creating jobs and building India’s economic strength over time.
“A long-term shareholder is not a speculator but a provider of patient risk capital. By investing in and holding businesses, investors help companies expand, create jobs, innovate and contribute to India’s economic growth,” Kedia wrote.
Kedia framed the issue not merely as a tax debate but as a broader question of how India wants to shape its future growth model. According to him, the country needs significantly more long-term risk capital to create globally competitive businesses, infrastructure and entrepreneurship.
“India requires enormous amounts of long-term capital to build world class enterprises, infrastructure and global champions. Tax policy should encourage households to move savings from passive assets, including imported stores of value such as gold, into productive businesses that create jobs, generate tax revenues and build national wealth,” he stated
Kedia believes tax policy should actively encourage a shift away from passive stores of value and toward ownership of Indian businesses.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
