Quick Summary
India's equity market taxation framework is attracting renewed attention as investors and market participants call for lower taxes on stock market investments. The demand for tax relief has gained momentum amid substantial foreign portfolio investor (FPI) withdrawals, raising concerns about India's competitiveness as a preferred destination for global capital. With foreign investors reportedly withdrawing more than ₹3 lakh crore from Indian equities during the first nine months of 2026, discuss
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FAQ :
Investors are demanding the abolition of Long-Term Capital Gains (LTCG) tax on listed equities, a reduction in Short-Term Capital Gains (STCG) tax from 20% to 10%, and a rationalisation of Securities Transaction Tax (STT).
The demands are driven by substantial foreign portfolio investor (FPI) outflows, which have exceeded ₹3 lakh crore, and a desire to make Indian equity markets more competitive and attractive to both domestic and foreign investors.
Currently, long-term capital gains on qualifying listed equity shares and equity-oriented mutual funds are taxed at 12.5% on gains exceeding ₹1.25 lakh, subject to conditions.
Under existing provisions, qualifying short-term capital gains from listed equity shares and equity-oriented mutual funds are taxed at 20%, subject to applicable conditions.
Significant FPI withdrawals, reportedly over ₹3 lakh crore in the first nine months of 2026, have intensified discussions around tax reforms to improve India's appeal as an investment destination.
No official announcement has been made confirming the abolition of LTCG tax or a reduction in STCG rates. The Finance Minister has indicated that suggestions could be considered during the consultation process for the Union Budget 2027-28.
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