FM Sitharaman Says Government Will Consider FPIs' Concerns Over Capital Gains Tax

New Delhi, Nov 3 (KNN) Finance Minister Nirmala Sitharaman on Monday said the government would consider concerns raised by foreign portfolio investors (FPIs) over India's capital gains tax structure, amid growing demands for a reduction in long-term capital gains (LTCG) tax on equities.

Responding to a question on whether the upcoming Union Budget would create a more favourable environment for foreign investors and encourage dollar investments, Sitharaman acknowledged concerns among retail investors and participants in the equity market.

She said taxation was only one of several factors influencing investment decisions, reported The Times Of India.

“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.

Finance Minister acknowledges changing market conditions

Sitharaman pointed out that India's tax structure was similar in 2023-24, when the country recorded its highest foreign investment inflows. 

However, she acknowledged that market conditions had changed, with net outflows by foreign institutional investors (FIIs) increasing before showing signs of recovery.

“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 different was done for drawing investments.” she said.

The Finance Minister added that India needed adequate capital to sustain economic growth of over 7 per cent and that investors' concerns needed to be heard.

“Because at a time where our growth is very important, where people are putting their very best, 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.

Sitharaman also highlighted the government's efforts to deepen and widen the bond market, while acknowledging investors' demand for greater support for equity markets.

SEBI reportedly seeks LTCG tax relief

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.

The regulator has asked the government to consider scrapping LTCG tax on equity investments by foreign investors. It has also reportedly proposed relief for domestic mutual fund investors switching from one scheme to another.

Under the reported proposal, 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, the report added.

(KNN Bureau)