Finance Minister Nirmala Sitharaman on Monday acknowledged growing concerns among foreign portfolio investors (FPIs) over India's capital gains tax structure, saying the government would first listen to their concerns before considering possible changes. Her remarks come amid record foreign investor withdrawals from Indian equities and renewed demands for a reduction in long-term capital gains (LTCG) tax.
Speaking at the Financial Express Leadership Awards, Sitharaman said the tax structure had remained unchanged since 2023, when India witnessed record foreign investment inflows. However, she acknowledged that the investment environment had changed considerably since then.
-
Indian Markets Turning Corner After Two Tough Years, Says Sandeep Tandon -
NDTV Profit Ignite 2026: Experts See Opportunity In Equities, Stay Bullish For Long-Term -
Buy Right, Sit Tight Does Not Work for Individual Stocks, Says Dinshaw Irani -
'Worst Is Behind': Quant MF Sees Market Bottom, Flags 'Extreme Euphoria' In Midcaps -
India's Mutual Fund Industry Could Become A $1 Trillion Opportunity, Say Fund Managers -
'Foreign Investors Are Baraatis': Raamdeo Agrawal's Take On LTCG Tax -
Stay Invested Through Market Cycles: Raamdeo Agrawal at NDTV Profit Ignite -
Ramesh Damani Remains Bullish On India For Next 20-30 Years, Sees Bargains Amid Market Weakness -
CAS Came After A Long Consultation Process: SEBI Chairman Tuhin Kanta Pandey AT NDTV PROFIT IGNITE -
Aim To Cut FPI Onboarding Time From Mth To Five Days: SEBI Chairman Tuhin Kanta Pandey AT NDTV PROFI
"The tax structure today is what it was even in 2023 when inflows were record high. Circumstances have changed. FPI outflows have happened, voices of concern are louder," she said. The Finance Minister added that she recognised the demand for extending to equity investments the kind of support currently available to debt markets.
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
"First will hear them (FPIs) and then see what we can do," Sitharaman said, indicating that the government would consider the concerns before deciding on any possible action. She also cautioned that decisions on taxation would require careful consideration, describing them as delicate matters requiring significant business and commercial judgement. Sitharaman emphasised that India would need substantial capital, particularly equity investments, to sustain economic growth of 7% or more.
"At a time when growth is very important, and to sustain growth of 7% plus, we need capital, especially equity," she said.
READ | SEBI Flags High Transaction Costs In Market, Suggests Scrapping Of 12.5% LTCG Tax For FPIs
Her remarks underline the importance of maintaining India's attractiveness as an investment destination at a time when foreign investors have been reducing their exposure to domestic equities. The Finance Minister also acknowledged the argument that equity markets should receive policy support similar to that extended to debt markets, suggesting that the government was aware of the concerns being raised by market participants.
SEBI Recommends Scrapping 12.5% LTCG Tax For FPIs
Sitharaman's comments come amid reports that the Securities and Exchange Board of India (SEBI) has recommended scrapping the 12.5% long-term capital gains tax on foreign portfolio investments in Indian equities. According to a Reuters report citing two sources familiar with the matter, the market regulator has included the proposal in its pre-Budget recommendations to the Finance Ministry ahead of Union Budget 2027-28.
SEBI has also proposed allowing tax-neutral switching between mutual fund schemes for domestic investors, so that they can move existing investments into other schemes without triggering an immediate capital gains tax liability, subject to the proposed holding-period condition of more than one year. These recommendations are aimed at addressing concerns around transaction costs and improving the attractiveness of Indian equity markets for both domestic and foreign investors.
FPIs Withdraw Record Rs 3.08 Lakh Crore From Indian Equities
The growing debate over equity taxation comes against the backdrop of unprecedented foreign investor selling. Foreign portfolio investors withdrew a record Rs 3.08 lakh crore ($32.73 billion) from Indian equities between January and September 2026. The outflow was nearly double the Rs 1.66 lakh crore withdrawn during the entire calendar year 2025.
Sustained foreign selling has raised concerns about India's competitiveness as an investment destination, particularly as investors assess valuations, earnings growth and returns available across global markets.
The sharp withdrawals have also intensified calls for the government to review the tax burden on equity investments.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
