Sebi backs removal of long-term capital gains tax for foreign investors: Report
The recommendations come months ahead of the Union Budget, scheduled to be presented in February. However, the proposals are not binding, and the final decision rests with the government, the report noted.
- Nov 2, 2026,
- Updated Nov 2, 2026 12:59 PM IST
Markets regulator Securities and Exchange Board of India (Sebi) has recommended that the government remove the long-term capital gains (LTCG) tax imposed on foreign investors, news agency Reuters reported, citing sources.
According to the report, Sebi has also proposed tax relief for domestic mutual fund investors. The regulator has suggested exempting investors from LTCG tax when they sell existing mutual fund holdings to reinvest the proceeds in new schemes.
The recommendations come months ahead of the Union Budget, scheduled to be presented in February. However, the proposals are not binding, and the final decision rests with the government, the report noted.
Foreign investors have sold a record $31 billion (around Rs 2.94 lakh crore) worth of Indian stocks this year, while overseas investments by retail investors have surged amid stagnant returns.
Sebi's recommendations come after the regulator held several meetings with foreign investors over the past two years as selling continued, putting pressure on the Indian currency.
One consistent feedback from investors has been the need to reform India's tax structure for foreign investors, the report highlighted.
Global brokerage Jefferies, in a recent note, said any reduction in capital gains taxes could make the Indian market more attractive to foreign investors and support portfolio inflows.
Currently, investors pay long-term capital gains (LTCG) tax of 12.5 per cent on securities held for more than a year and short-term capital gains tax of 20 per cent. These are in addition to securities transaction tax (STT) on trades and withholding taxes on dividends.
"If and when this happens, it is likely to be viewed largely as a positive development. However, we will have to wait for the final announcement, which could form part of the Budget, as its presentation is about two months away," Raamdeo Agrawal, Chairman and Co-Founder of Motilal Oswal Financial Services (MOFSL), told Business Today.
Markets regulator Securities and Exchange Board of India (Sebi) has recommended that the government remove the long-term capital gains (LTCG) tax imposed on foreign investors, news agency Reuters reported, citing sources.
According to the report, Sebi has also proposed tax relief for domestic mutual fund investors. The regulator has suggested exempting investors from LTCG tax when they sell existing mutual fund holdings to reinvest the proceeds in new schemes.
The recommendations come months ahead of the Union Budget, scheduled to be presented in February. However, the proposals are not binding, and the final decision rests with the government, the report noted.
Foreign investors have sold a record $31 billion (around Rs 2.94 lakh crore) worth of Indian stocks this year, while overseas investments by retail investors have surged amid stagnant returns.
Sebi's recommendations come after the regulator held several meetings with foreign investors over the past two years as selling continued, putting pressure on the Indian currency.
One consistent feedback from investors has been the need to reform India's tax structure for foreign investors, the report highlighted.
Global brokerage Jefferies, in a recent note, said any reduction in capital gains taxes could make the Indian market more attractive to foreign investors and support portfolio inflows.
Currently, investors pay long-term capital gains (LTCG) tax of 12.5 per cent on securities held for more than a year and short-term capital gains tax of 20 per cent. These are in addition to securities transaction tax (STT) on trades and withholding taxes on dividends.
"If and when this happens, it is likely to be viewed largely as a positive development. However, we will have to wait for the final announcement, which could form part of the Budget, as its presentation is about two months away," Raamdeo Agrawal, Chairman and Co-Founder of Motilal Oswal Financial Services (MOFSL), told Business Today.