New Delhi, Nov. 5 -- The debate on easing long-term capital gains tax on equity investments began with the massive pullout by foreign portfolio investors (FPIs). It has since widened to include the possibility of reducing capital gains tax on equity investments across the board, for both foreign and domestic investors.

The argument is that, before 2018, long-term capital gains on equity investments held for one year or longer were exempt from tax. The Union budget of 2018 introduced a 10% tax, which has since risen to 12.5%, plus surcharge and cess, as applicable.

In debt mutual funds, a staple investment vehicle for bonds and other instruments, capital gains are taxed as short-term capital gains, irrespective of the holding period. The...