There has been growing buzz on Dalal Street over the possibility of the government considering cut in the long-term capital gains (LTCG) tax, amid sustained foreign investor outflows from the Indian stock market, which have already exceeded ₹2.34 lakh crore in 2026.
Against this backdrop, the Securities and Exchange Board of India (SEBI) has reportedly recommended that the government remove the LTCG tax imposed on foreign investors, two people with direct knowledge of the matter told Reuters.
SEBI has also proposed tax relief for domestic mutual fund investors, suggesting that they be exempt from LTCG tax when selling existing holdings to invest in new ones, the report said, citing the same sources.
Currently, foreign investors pay 12.5% LTCG tax on eligible equity investments held for more than 12 months. Short-term capital gains (STCG) on equity investments held for 12 months or less attract a 20% tax. Investors also pay securities transaction tax (STT) on trades and withholding tax on dividends.
Finance Minister Nirmala Sitharaman, speaking at the Bloomberg New Economy Forum in New Delhi last in mid-October, said she was keen to listen to discussions around STT as India seeks to attract capital inflows.