Veteran investor Vijay Kedia has 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. 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. However, Kedia believes that current taxation frameworks often blur the line between investment and speculation, 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 has also called for the abolishment of the Securities Transaction Tax (STT), describing it as an "additional layer of taxation" that has outlived its original purpose. In the third and final part of his suggestions to Finance Minister Nirmala Sitharaman and the Ministry of Finance for strengthening India's capital markets, Kedia has called for a review of the continued relevance of STT. As per Kedia's analysis, STT was originally introduced as a simplified transaction tax to facilitate easier collection of taxes from capital market transactions. However, over time, STT has effectively become an additional layer of taxation alongside other market-related levies. The key concern highlighted by Kedia is that STT is payable regardless of whether an investor earns a profit or suffers a loss, unlike income tax which is linked to earnings. "The investor pays STT irrespective of whether a trade generates profit or results in a loss. Unlike income tax, it is payable simply for participating in the market, making it a cost that cannot be avoided," Kedia noted. This distinction is significant because transaction costs can directly affect investment returns, particularly for retail investors who may already be operating with limited capital.
Ace investor Vijay Kedia has urged the government to provide tax relief on dividend income earned from listed equities, arguing that shareholders currently face double taxation despite taking significantly higher risks than debt investors. In a post addressed to Finance Minister Nirmala Sitharaman and the Finance Ministry, Kedia said India's tax framework places equity investors at a relative disadvantage compared to debt providers, even though equity capital plays a far more critical role in supporting entrepreneurship, innovation, and economic growth. The proposal comes as part of a three-part set of suggestions shared by Kedia on measures aimed at strengthening India's capital markets. According to Kedia, equity investors take significantly higher risks than lenders, as "a lender has a contractual right to interest and principal repayment. A shareholder has no such guarantee. Dividends are discretionary, capital is fully at risk, and the shareholder stands last in line if a business fails."
According to Kedia's analysis, companies can raise capital either through debt or equity financing. In the case of debt financing, interest payments made to lenders are treated as business expenses and deducted before tax, with lenders then paying tax on the interest income received. However, in equity financing, dividends are distributed from profits that have already been subjected to corporate tax, and shareholders are required to pay tax again on the dividend income, effectively resulting in double taxation of the same stream of earnings. Kedia pointed out that when a company raises money through debt, the interest paid to lenders is treated as a business expense and deducted before tax. The lender then pays tax on the interest received. Equity investors, however, face a different situation, as dividends are distributed from profits that have already been subjected to corporate tax, and shareholders are required to pay tax again on the dividend income, creating what Kedia calls double taxation of the same earnings stream.
Kedia highlighted that investors already pay a range of mandatory charges including brokerage fees, exchange transaction charges, GST on transaction-related costs, SEBI turnover fees, stamp duty and STT. According to the investor, high transaction costs and multiple layers of taxation discourage broader participation in equities, especially among long-term retail investors. He noted that capital markets play a crucial role in channeling household savings into productive enterprises, supporting entrepreneurship, generating employment and strengthening economic growth. The veteran investor called for a review of STT's relevance, stating that India's equity markets have matured significantly since the introduction of STT in 2004. Kedia argued that India needs enormous amounts of long-term domestic capital to build world-class companies, infrastructure and global champions, and that tax policy should encourage households to move savings away from passive assets such as gold towards productive businesses that create jobs and generate tax revenues.
Kedia argued that if debt investors receive tax-deductible compensation despite carrying lower risk, there is a strong case for providing more favourable tax treatment to equity investors who support long-term wealth creation and economic development. Calling for policy support to strengthen India's capital markets, he said the country should encourage patient long-term risk capital and broader participation in equity investing, with tax policy rewarding investors who provide permanent equity capital to Indian businesses instead of disadvantaging them relative to debt capital. His latest recommendation completes a series of suggestions aimed at making Indian capital markets more efficient and investor-friendly. Kedia's central argument is that a long-term shareholder is not a speculator but a provider of patient risk capital, by investing in businesses and remaining invested through market cycles, shareholders help companies expand, create jobs, innovate and contribute to economic growth. While Kedia's proposals are unlikely to be adopted immediately, they touch on a larger debate about how India should balance tax collection with encouraging long-term investing. Kedia believes that tax policy should clearly distinguish between investment and speculation, with long-term shareholders being partners in wealth creation rather than mere market participants.
