Samvat 2083: Shankar Sharma Wants A Tax Cut, But Not The One You'd Expect

Much of Dalal Street has long pressed for the long-term capital gains tax to be scrapped. Shankar Sharma has been one of the levy's most vocal critics for years, which would make him a natural voice for that push. His wish list, however, points elsewhere.

Speaking to NDTV Profit in a Samvat-to-Samvat conversation on Muhurat trading day, the veteran investor said the government “should focus on lower taxation for fixed income”.

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His views on LTCG haven't softened. He said he would “continue to be the biggest opponent of LTCG”. But he rejected one of the market's favourite explanations for the foreign exodus this year, saying “FIIs deserting India had nothing to do with LTCG”.

That comes at a time when the tax is back in the news. Earlier this month, the Securities and Exchange Board of India reportedly recommended that the government scrap the 12.5% LTCG tax on listed equities held for more than a year by foreign portfolio investors, as part of its pre-Budget suggestions. Foreign investors have pulled about $31 billion out of Indian equities in 2026, according to Reuters, and brokerage IIFL estimates that removing the tax could add about 2.3 percentage points to their returns. The recommendation is not binding, and the final call rests with the government.

If Sharma is right, a tax cut by itself won't bring that money back. He was equally unimpressed by the recent pickup in foreign flows. “Buying is a tactical move by FIIs,” he said, suggesting the buying may not last.

His push for fixed income puts a different set of savers at the centre of the debate. Gains on most debt products are now taxed at the investor's income-tax slab rate, which can take a large share of already modest returns for people in higher brackets.

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Smallcaps Over The Nifty

Sharma's comments on equities were just as blunt, and SIP investors may not like them. “The way SIPs have been marketed is not the right thing,” he said. Millions of Indians have been told to stay disciplined and expect roughly 12% a year, but Sharma said it is “not necessary that SIPs always give 12% returns”.

He wasn't excited about the benchmark either. “A 5-10% Nifty return is not something to be excited about,” he said. For him, the opportunity lies further down the market. “Long-term money in India remains in smallcaps,” he said, adding that “smallcap investors have been rewarded over the last two years”.

Looking globally, he isn't convinced by the trade that has dominated markets. “The AI trade continues to look quite weak,” he said.

So as Samvat 2083 begins, Sharma is arguing against much of the market consensus, from tax relief for FIIs to the returns investors can expect from their SIPs.

ALSO READ: Why Shankar Sharma Does Not Recommend Stocks To His Sister: 'If I Give You Five Stocks...'

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