LTCG Collections Rise 79% While Debt Falls to 58.2% of GDP: Reading the Fiscal Disclosures
Answers tabled in Parliament put capital gains tax revenue at ₹1.29 lakh crore and record that 48 per cent of a decade's net borrowing went into capital expenditure
What happened
Parliamentary answers are among the most under-read primary sources available to an aspirant, and this set is unusually informative because the numbers connect. A sharp rise in capital gains revenue, a falling debt ratio and a stated split of borrowing between capital and revenue uses are three windows onto the same question — whether the fiscal position is improving in composition as well as in headline size.
Three fiscal disclosures and what each actually measures
| Disclosure | Figure | What it measures |
|---|---|---|
| LTCG collections, AY 2025-26 | ₹1,29,158 cr (from ₹72,249 cr) | Cyclical revenue tracking asset prices — not a structural gain |
| Centre's debt-to-GDP | 58.2% (from 61.4% in 2020-21) | Stock of liabilities against annual output — a fraction with two moving terms |
| Net borrowing to capex, 10 years | ~48% (₹60.21 lakh cr) | Quality of borrowing — how much debt has an asset counterpart |
Source: Government replies in Parliament, July 2026; Receipt Budget 2026-27
Capital gains arise on the transfer of a capital asset and are classified by holding period.
●For listed equity shares and equity-oriented mutual funds the threshold is twelve months: gains on assets held longer are long-term, taxed at 12.5 per cent on amounts exceeding ₹1.25 lakh in a financial year, while shorter holdings attract short-term capital gains tax at 20 per cent.
●The distinction between revenue and capital expenditure is equally examinable: revenue expenditure meets running costs and creates no assets, whereas capital expenditure creates assets or reduces liabilities and is therefore treated as more productive borrowing.
●Debt-to-GDP measures the stock of liabilities against annual output and is the standard sustainability indicator, distinct from the fiscal deficit, which measures the annual flow of borrowing.
●The FRBM Act, 2003 provides the statutory framework for fiscal targets.
A falling debt-to-GDP ratio can result from borrowing less or from the economy growing faster — the ratio is a fraction, and reading it requires knowing which of its two terms moved.
◎ In Simple Words
When you sell shares you have held for a long time at a profit, you pay tax on that profit. The government collected about ₹1.29 lakh crore this way last year, nearly 79 per cent more than the year before, mostly because share prices rose and more people invested. Separately, the government's total borrowing compared with the size of the economy has fallen, and it said that about half the money it borrowed over the last ten years went into building things like roads and railways rather than into running costs.
Factual Pointers
Practice · 2 questions
With reference to the taxation of capital gains on listed equity shares in India, which one of the following statements is correct?
Consider the following statements:
1. Debt-to-GDP measures the stock of outstanding liabilities against annual output, whereas the fiscal deficit measures the annual flow of fresh borrowing.
2. A decline in the debt-to-GDP ratio can occur even if the absolute stock of debt increases, provided nominal GDP grows faster.
3. Capital expenditure creates assets or reduces liabilities, whereas revenue expenditure meets recurring costs and creates no assets.
Which of the statements given above are correct?
Mains Practice Questions
A falling debt-to-GDP ratio may reflect fiscal consolidation or nominal growth. Discuss why decomposing the ratio matters for assessing fiscal sustainability in India.
Borrowing to create assets differs in kind from borrowing to meet running costs. Evaluate India's record on the composition of public borrowing over the past decade.
Revenue from capital gains taxation is inherently cyclical. Examine the risks of treating buoyant asset-linked receipts as a durable base for expenditure commitments.
Frequently Asked
· People also askHow much did the Centre collect from LTCG tax on equities?
About ₹1,29,158 crore in assessment year 2025-26, up from ₹72,249 crore in AY 2024-25 — a rise of roughly 79 per cent. The government told Parliament in July 2026 that there is no proposal to scrap the levy on equity transactions.
GS3 · TaxationThe increase reflects equity market performance and realisation behaviour rather than any rate change, which is why such receipts are treated as cyclical and are a risky base for recurring expenditure commitments.
SOURCE Government reply in Parliament, 20 July 2026
What is the current LTCG rate on listed equity in India?
12.5 per cent, applying only to gains exceeding ₹1.25 lakh in a financial year, on listed equity shares and equity-oriented mutual funds held for more than twelve months. Gains on holdings of twelve months or less are short-term and taxed at 20 per cent.
GS3 · Direct taxesThe lower rate on longer holdings is a deliberate incentive for patient capital. The ₹1.25 lakh annual exemption removes small investors from the net entirely, which is the distributional element of the design.
SOURCE Income Tax provisions on capital gains
What is the difference between debt-to-GDP and the fiscal deficit?
Debt-to-GDP measures the accumulated stock of outstanding liabilities against annual output. The fiscal deficit measures the flow of fresh borrowing in a single year. One is a balance-sheet measure, the other an annual account — a stock and a flow.
GS3 · Fiscal policyThe distinction explains why the debt ratio can fall while the government continues borrowing: if nominal GDP grows faster than the debt stock, the fraction declines even as its numerator rises.
SOURCE Receipt Budget 2026-27
Why does the split between capital and revenue expenditure matter?
Because capital expenditure creates assets or reduces liabilities, generating future output against which debt can be serviced, while revenue expenditure meets running costs and creates nothing. Borrowing for the first is more defensible than borrowing for the second.
GS3 · Public financeThe disclosure that roughly 48 per cent of net borrowing over a decade — about ₹60.21 lakh crore — went to capital expenditure indicates that a little under half the debt has an asset counterpart, an improvement on periods when borrowing largely financed the revenue deficit.
SOURCE Receipt Budget 2026-27; government reply in Parliament
Has India's debt-to-GDP ratio genuinely improved?
The Centre's ratio has fallen from 61.4 per cent in 2020-21 to about 58.2 per cent, which is a real improvement. But the ratio is a fraction, and part of the decline reflects strong nominal GDP growth including the post-pandemic recovery and inflation rather than reduced borrowing alone.
GS3 · Fiscal sustainabilityReading it as pure consolidation overstates the contribution of policy. Note also that the general government figure — Centre plus States — is materially higher and is the measure used in most international comparisons.
SOURCE Receipt Budget 2026-27