India reopens debate on equity taxes and relief for foreign investors

what happened

India may revisit the taxation of equities as the government reviews input from investors and industry groups, CNBC-TV18 reported. Dinesh Kanabar of Dhruva Advisors and Sunil Badala of KPMG India have called for changes to capital-gains rules, more consistent tax policy and measures to reflect the effect of a weaker rupee on overseas investors.

Finance Minister Nirmala Sitharaman has said she is willing to consider proposals involving equity taxes, including long-term capital gains (LTCG) and the securities transaction tax (STT). Kanabar said India’s framework is being compared with those of South Korea, Taiwan, Vietnam and Brazil, where some markets provide exemptions for long-term gains.

For the financial year ended March 2025, equity-related capital-gains receipts, covering listed and unlisted shares as well as mutual funds, were about ₹1.3 lakh crore, Kanabar said. STT collections reached approximately ₹53,000 crore in FY26. He said cutting or eliminating equity capital-gains tax could leave a sizeable hole in government revenue that a higher STT would not fully replace.

Badala also suggested restoring an earlier arrangement under which eligible foreign investors calculated gains in foreign-currency terms, allowing exchange-rate movements to be included. Kanabar said the treatment of sovereign wealth and pension funds could also be reviewed. No tax measures have been announced, and the next steps will depend on the government’s assessment of the submissions.

why it matters

The discussion matters for Indian equities because tax treatment can affect the country’s appeal to overseas capital and the predictability of returns after currency moves. Any concessions would also have to be weighed against potential pressure on public revenue.

instruments