Low capital gains tax, high trade-off? Financial expert flags the cost India doesn’t see

At a time when India’s equity markets continue to draw millions of new investors, a pointed question has resurfaced: does a low capital gains tax really translate into better quality of life for citizens? 

Chartered Accountant and financial educator Nitin Kaushik, in a recent post on X (formerly Twitter), flagged what he called an under-discussed trade-off behind India’s investor-friendly tax regime. While India’s long-term capital gains (LTCG) tax on equities stands at about 12.5% — among the lowest across major economies — Kaushik argued that the broader implications of this policy often go unnoticed. 

Low taxes, global comparison 

Kaushik contrasted India’s approach with that of developed economies, where capital gains are taxed at much higher rates. In the United States, LTCG can go up to around 20% depending on income levels. In the UK, the rate ranges between roughly 18% and 24%, while Germany taxes capital gains at about 25% and Japan at around 20%. 

“These countries collect more — and in return, citizens usually get stronger public systems,” Kaushik wrote, pointing to healthcare, infrastructure and social security as key areas where higher tax collections have enabled deeper public investment. 

Healthcare as the sharpest divide 

Healthcare, he noted, offers the clearest contrast. In Germany, nearly 90% of citizens are covered under statutory health insurance. In the UK and Japan, universal healthcare is the default rather than a privilege, ensuring predictable access to medical care without financially devastating families. 

India, by comparison, still lacks full universal health coverage. Public healthcare spending remains at about 2.1% of GDP, significantly below the levels seen in high-income nations, many of which spend 10% or more of GDP on health. The gap shows up in outcomes: life expectancy in countries such as the UK, Germany and Japan comfortably exceeds 80 years, and infant mortality rates are among the lowest globally. 

Infrastructure and social safety nets 

Kaushik extended the comparison to transport and infrastructure. Europe and Japan, he said, offer dense metro systems, reliable railways and high-speed trains that operate safely and predictably on a daily basis. While India has built an enormous road network and expanded connectivity rapidly, it still trails global leaders on road quality, safety and per-capita access. 

A similar pattern appears in social security. Across OECD countries, public social spending averages 20-30% of GDP, covering pensions, unemployment benefits, disability support and family welfare. India has made notable progress in expanding social protection, Kaushik acknowledged, but the depth and adequacy of these systems remain well short of developed welfare states. 

The trade-off investors rarely discuss 

The result, Kaushik argued, is a clear trade-off. Low capital gains taxes undeniably make investing more attractive and help fuel participation in markets. However, those tax savings have not yet translated into consistently world-class public healthcare, transport or social safety nets for citizens. 

Importantly, he cautioned that higher taxes alone are not a silver bullet. “How effectively taxes are used matters more,” Kaushik noted, adding that developed nations demonstrate how higher taxation, when paired with strong delivery and governance, can meaningfully improve quality of life. 

Beyond tax rates 

Kaushik concluded that India’s challenge is not merely about whether taxes should be higher or lower. The real test lies in converting tax revenues — whatever the rate — into tangible outcomes that improve everyday life.

As India debates its fiscal priorities amid economic growth and rising investor participation, his comments have sparked a broader conversation on what citizens should reasonably expect in return for the taxes they pay. “Let’s talk solutions next,” he wrote, signalling that the discussion on balancing growth, taxation and public welfare is far from over.