Stories
Tax Experts Urge Relief for Foreign Investors as Equity Taxation Comes Under Scrutiny
- •Industry experts Dinesh Kanabar and Sunil Badala have called for a review of India's capital gains taxation and securities transaction tax to remain competitive with emerging markets.
- •Finance Minister Nirmala Sitharaman has indicated openness to suggestions regarding the taxation of equities, including long-term capital gains tax.
- •Foreign portfolio investors are raising concerns about the impact of rupee depreciation on investment returns, urging the restoration of capital gains calculations in foreign currency terms.
- •Kanabar noted that capital gains tax collections reached around ₹1.3 lakh crore and STT collections stood at approximately ₹53,000 crore, making any tax reduction a challenge for budget revenues.
- •Experts also emphasized the need for consistent tax policies and potential exemptions for sovereign wealth funds and pension funds to boost foreign inflows.
Key Questions Answered
Tax experts Dinesh Kanabar and Sunil Badala highlighted the need to review capital gains taxation, enhance tax certainty, and address how rupee depreciation negatively impacts foreign investors. They noted that India levies both capital gains tax and the securities transaction tax, unlike competing markets that offer exemptions on long-term capital gains.
Sunil Badala explained that rupee depreciation diminishes investment returns when converted back into dollars, meaning an investment showing a rupee-denominated gain can yield lower returns or losses in dollar terms. To counter this, experts suggested restoring provisions allowing eligible foreign investors to calculate capital gains in foreign currency terms.
For the financial year ending March 2025, capital gains tax collections from equities, mutual funds, and shares totaled approximately ₹1.3 lakh crore. Additionally, securities transaction tax collections reached around ₹53,000 crore in fiscal year 2026.
