New Delhi, Nov. 5 -- The existing long-term capital gains (LTCG) tax on equity investments should be reduced, with a complete exemption for holdings beyond three years to attract more stable foreign capital and improve investor returns, according to a report by Union Bank of India.

Against the backdrop of ongoing calls from investors and market participants for rationalisation or abolition of LTCG tax, the bank recommended reducing the existing 12.5 per cent rate on equity investments held for one to three years.

For holdings beyond three years, it proposed a complete exemption from LTCG tax to encourage long-term foreign investment.

Currently, short-term capital gains (STCG) on listed equities are taxed at 20%, while long-term capital...