Government Mints Over 8.69 Lakh Crore Rupees in STT and LTCG Taxes as FII Outflows Reach 14.45 Lakh Crore Rupees

A decade of rapid financialization in Indian equities has generated record revenues for the government exchequer, even as foreign institutional investors (FIIs) engineered an unprecedented retreat from the domestic cash market. Comprehensive capital market data tracking financial years 2015-16 through 2025-26 shows combined government receipts from Securities Transaction Tax (STT) and Long-Term Capital Gains (LTCG) tax soaring 25.4-fold, from ₹7,350 crore to ₹1,86,680 crore, amassing a total collection of ₹8,69,969 crore over the period.

This 38.2% compound annual growth rate (CAGR) in equity taxation unfolds against a remarkable counter-narrative: foreign institutions offloaded a staggering ₹14.45 lakh crore in secondary cash markets between calendar years 2016 and 2026 year-to-date (YTD). Crucially, overseas funds acted as net sellers in 9 out of the 11 years, with roughly 72% of their cumulative sales concentrated in an aggressive exit wave post-January 2024.

The Tax Mintage: STT and LTCG Trajectory

When the modern taxation era began in FY 2015-16, listed equities enjoyed a complete exemption from LTCG under Section 10(38) of the Income-tax Act, leaving STT as the primary levy on stock market transactions. In FY 2015-16, STT yielded ₹7,350.11 crore. Over the next decade, soaring retail participation, derivative trading volumes, and consecutive tax rationalizations catapulted annual STT collections to an estimated ₹57,522 crore in FY 2025-26—marking a 7.8-fold rise (+683%) at a CAGR of 22.8%.

The reintroduction of LTCG tax at a 10% rate in the Union Budget of 2018—later revised to 12.5% in the July 2024 Budget alongside increased derivative STT rates—unlocked another major revenue channel. In its initial full year of implementation (FY 2018-19), LTCG brought in ₹29,220 crore. By FY 2024-25 and FY 2025-26, annual LTCG collections surged to ₹1,29,158 crore each year, representing a 4.4-fold leap (+342%) and yielding a total collection of ₹6,09,138 crore since its return.

Year-Wise STT and LTCG Tax Receipts (FY16 to FY26):

• FY 2015-16: STT: ₹7,350.11 cr | LTCG: Exempt
• FY 2016-17: STT: ₹8,998.12 cr | LTCG: Exempt
• FY 2017-18: STT: ₹11,881.40 cr | LTCG: Exempt
• FY 2018-19: STT: ₹11,527.50 cr | LTCG: ₹29,220 cr
• FY 2019-20: STT: ₹12,374.23 cr | LTCG: ₹26,008 cr
• FY 2020-21: STT: ₹16,926.99 cr | LTCG: ₹38,589 cr
• FY 2021-22: STT: ₹23,191.03 cr | LTCG: ₹86,075 cr
• FY 2022-23: STT: ₹25,085.37 cr | LTCG: ₹98,681 cr
• FY 2023-24: STT: ₹33,777.78 cr | LTCG: ₹72,249 cr
• FY 2024-25: STT: ₹52,196.86 cr | LTCG: ₹1,29,158 cr
• FY 2025-26: STT: ₹57,522.00 cr | LTCG: ₹1,29,158 cr

FII Retreat: 14.45 Lakh Crore Rupees in Outflows

While the exchequer captured unprecedented fiscal revenue, foreign institutional investors exhibited persistent selling behavior. Over the 11-calendar-year span, FIIs registered net purchases in only two calendar years: 2019 (+₹39,881 crore) and 2020 (+₹65,246 crore).

The scale of foreign outflows escalated dramatically in recent years:

• 2016: Net sold ₹10,582 crore
• 2017: Net sold ₹44,109 crore
• 2018: Net sold ₹73,212 crore
• 2019: Net bought ₹39,881 crore
• 2020: Net bought ₹65,246 crore
• 2021: Net sold ₹92,280 crore
• 2022: Net sold ₹2,78,430 crore
• 2023: Net sold ₹16,511 crore
• 2024: Net sold ₹3,02,435 crore
• 2025: Net sold ₹3,06,419 crore
• 2026 YTD: Net sold ₹4,26,333 crore

Between January 2024 and 2026 YTD, foreign portfolio sales totaled over ₹10.35 lakh crore—accounting for approximately 72% of the cumulative ₹14.45 lakh crore pulled out since 2016.

Domestic Absorption and What It Means for Investors

The divergence between soaring government revenues and massive foreign selling underscores the structural maturation of India's capital markets. Despite relentless selling pressure by overseas funds, headline indices such as the Nifty 50 and BSE Sensex maintained long-term upward trajectories, sustained by domestic institutional investors (DIIs), systematic investment plans (SIPs), and direct retail equity investments.

However, this resilience has come at a direct cost to market participants. Higher rates on transactions and capital gains mean investors face higher friction costs. With STT surpassing ₹57,000 crore annually and LTCG taking over ₹1.29 lakh crore out of gross returns, long-term wealth creators are increasingly looking to optimize their tax liabilities, rebalancing portfolios, and relying on domestic compounding to offset fiscal headwinds.

Tags: Securities and Exchange Board of India Ministry of Finance BSE Sensex Nifty 50 FII Flows STT