India should consider removing the capital gains tax imposed on foreigners to help revive the country’s stock market, Edelweiss Financial Services Ltd. Chairman and Managing Director Rashesh Shah said, adding to a growing clamor for the exemption to boost inflows and support the local currency.
“We need to showcase to the foreigners we want them,” Shah said in an interview with Bloomberg Television’s Menaka Doshi and Haslinda Amin in Mumbai on Friday. “If India wants foreign investors to come back, we want India to be a good permanent allocation for foreigners, we should do something and removing capital gains tax for foreigners might be an easier answer.”
Shah joins dozens who are pushing the government to exempt foreign portfolio investors from paying long-term capital gains tax on listed equities. Finance Minister Nirmala Sitharaman said earlier this week that she will consider tax changes on stocks, but stopped short of confirming whether the government was looking at revisions to capital gains or transaction taxes.
Long-term gains on listed equities held for more than a year are taxed at 12.5%, while short-term gains are levied 20%.
Foreign investors have been relentless sellers of Indian stocks, with net outflows exceeding $28 billion so far this year, according to data compiled by Bloomberg. But a sharp selloff in global artificial-intelligence stocks and a decline in oil prices have prompted some overseas funds to return to the market. Foreign investors have poured in more than $5 billion into Indian equities over the past three weeks, helping drive a nearly 10% rebound in the domestic market, data show.