Business & Finance
Sitharaman Acknowledges FPI Concerns Over Equity Capital Gains Tax
Finance Minister Nirmala Sitharaman said on Monday that the government will consider concerns raised by foreign portfolio investors (FPIs) about India’s capital gains tax structure, amid growing calls to reduce long‑term capital gains (LTCG) tax on equities. Asked whether the upcoming Budget would create a more favourable environment for foreign investors and encourage dollar investments, Sitharaman noted that taxation is only one of several factors influencing investment decisions. "Taxation is just one part of it, but I quite appreciate and also realise the sensitivity and the anxiety which is prevailing among retail investors and also among equity participants," she said at the Financial Express Leadership Awards 2026.
She pointed out that India’s tax structure was the same in 2023‑24, when the country recorded its highest foreign investment inflows, but that market conditions have changed. "The taxation structure was what it is today, even in 2023‑24, when we had good inflow into the country. 23‑24 saw the highest. The taxation was similar even then. Nothing differently was done for drawing investments. But of course, the situation is very different now. Circumstances have changed. Challenges have grown. More net FII outflows have happened. It's started resuming now. They've started coming back now. So I know that circumstances have changed and therefore voices of concern are louder. I quite appreciate that. I'll consider all this," she said.
Sitharaman added that India needs capital to sustain economic growth of over 7 % and that investors’ concerns must be heard. "Because at a time where our growth is very important, where people are putting their very best, that we are able to see sustained seven-plus growth. In order to keep that intact, we need capital... I wouldn't want to say more at this stage, but I recognise the voice," she said.
She also highlighted the government’s efforts to deepen and widen the bond market, while acknowledging that investors are seeking greater support for equity markets. Her remarks come amid growing calls for a review of the LTCG tax regime. The Securities and Exchange Board of India (SEBI) has reportedly recommended tax relief for both foreign and domestic investors. According to a Reuters report, SEBI has asked the government to consider scrapping LTCG tax on equity investments by foreign investors and has also proposed tax relief for domestic mutual fund investors switching from one scheme to another, so that investors would not have to pay LTCG tax when transferring their existing mutual fund investments to other schemes. The recommendations have been submitted ahead of the Union Budget scheduled for February.