Sitharaman will consider investor concerns over equity taxation
Finance Minister Nirmala Sitharaman acknowledged the anxiety of retail and foreign investors regarding the current capital gains tax structure.
Finance Minister Nirmala Sitharaman said on Monday that the government would take into account the feedback from foreign portfolio investors (FPIs) and domestic equity market participants regarding India's taxation regime. Speaking at the Financial Express Leadership Awards 2026, she noted that the government recognises the growing anxiety among those participating in the equity market, according to the Times of India.
The minister stated that while taxation is only one factor in investment decisions, she understands that the current environment has made investor concerns more prominent. She noted that while the tax structure was similar during the 2023-24 period when foreign inflows were at their highest, the current situation involves different challenges and increased net foreign institutional investor (FII) outflows.
Sitharaman mentioned that although FII outflows had risen, they have started to show signs of recovery. She said she would take these various concerns into consideration, adding that capital is essential to maintain economic growth of more than 7 per cent.
The remarks come as the Securities and Exchange Board of India (SEBI) has reportedly suggested tax relief for both domestic and foreign investors. A Reuters report stated that SEBI has asked the government to consider removing the long-term capital gains (LTCG) tax on equity investments for foreign investors and providing relief for domestic mutual fund investors switching schemes.
Currently, the LTCG tax on the sale of equities is 12.5 per cent without indexation benefits. This tax applies to gains above Rs 1.25 lakh per financial year on listed shares, though no such limit exists for unlisted shares.
The government's response is being watched closely ahead of the Union Budget scheduled for February.