'Indian investors saved market, reward them - cut capital gains tax': Raghav Chadha to Centre

AAP MP Raghav Chadha on Tuesday batted for lowering of taxes on capital gains, saying high taxation in the country is discouraging long-term investment. "Investment in India is highly taxed," he said while speaking in the Rajya Sabha. "We have seen over the past few years that global capital is very volatile. As a result, from January 2025 to the second week of December 2025, foreign portfolio investors withdrew Rs 1.6 lakh crore from Indian equities." 

And when the foreign investors withdrew, the AAP MP pointed out, it was Indian investors who saved the market by pouring millions into equities. "When this withdrawal happened, domestic institutional investors and domestic investors stepped forward to protect India's stock market. Domestic investors invested Rs 7 lakh crore in Indian equities. This was also a historic achievement. It shows the maturity of the market. But more than that, it shows that when foreign money leaves, it is the Indian investor who comes to the rescue of the stock market."

Chadha, however, suggested that the government's high taxation has hurt the domestic savers. "However, when salaried employees invested through SIPs, when small savers invested through mutual funds, and when pension and insurance money was invested-what did the government do to encourage this investment?" he asked.

He argued that the current tax framework was working against long-term savings. "Today, a taxation regime has emerged in which capital gains tax is very high. Investors do not get the benefit of indexation. Because surcharges are high, tax rates have increased sharply. And due to frequent changes, investors do not get certainty. A system has been created where long-term investments in this country are being treated as short-term speculation when it comes to taxation. This needs to be changed."

Linking taxation policy to capital market depth, Chadha said, "If India truly wants deep capital markets and long-term domestic savings, then patient capital must be respected and not penalised. The basic principle of economics is: tax consumption if you must, but nurture investments. We will have to encourage investment. By over-taxing investments, we are disincentivising wealth creation."

He also flagged how bank deposits have declined, which may push the loan interest rates - a negative for MSMEs. "We have seen that India’s hardworking, middle-class citizen keeps most of their savings in bank savings accounts or in fixed deposits. We have seen that in the financial year 2024–25, the growth in bank deposits fell to just 10%, compared to the previous financial year, 2023–24, when it was 13%. That is, there has been a decline in deposit growth. What happens as a result? Banks’ cost of funds increases. Loans become expensive. MSMEs suffer, and financial stability weakens."

Outlining specific policy suggestions, the AAP MP said, "First, the tax-free limits should be increased as far as interest income from savings bank accounts is concerned. Second, if someone makes a fixed deposit for more than five years, they should be given tax relief. There needs to be tax incentivisation for that kind of investor."

Chadha, who is also a chartered accountant, said that the benefit of indexation under long-term capital gains should be implemented properly and in spirit across asset classes. "The tax on short-term capital gains is very high; it should be reduced if we want to encourage investment. Along with this, we must ensure that patient domestic capital is preserved, rewarded, and not penalised."