The Modi government is considering raising holding period for imposition of tax on long-term capital gains (LTCG) by one year in the upcoming Union Budget on February 1. LTCG tax was introduced in Union Budget 2018-2019. The government had estimated imposition of this tax would bring marginal revenue gain of about Rs 20,000 crore in the first year. Investors had sought LTCG tax relief from the government in last year's Budget too. 

In September last year, PM Narendra Modi had promised foreign investors that the government was working towards "bringing tax on equity investments in line with global standards". The government may change the definition of 'long term' from a year to two years, according to a report in The Economic Times.  

This is likely to attract more foreign investors. Currently, long-term means a holding period of more than one year from the date of purchase of securities.  Anyone selling listed equity shares after holding them for one year has to pay 10% LTCG tax on the profit earned over Rs 1 lakh in an year.

Short-term capital gains or profit from sale of equities within a holding period of one year are taxed at a rate of 15%. The ET report says government is consulting tax advisors and experts on the possible effects of removing tax on long-term capital gains (LTCG).  The government is also evaluating various options to attract more long-term investment from foreign investors.