Stories
Is India's Equity Tax Regime Harming Its Global Competitiveness?
M
Moneycontrol•18-10-2026, 17:18
Is India's Equity Tax Regime Harming Its Global Competitiveness?
- •Foreign portfolio investors have withdrawn Rs 4.74 lakh crore from Indian equities since January 2025, driven by multiple global and domestic factors including taxation.
- •India levies a 12.5 percent long-term capital gains tax on listed equities, a 20 percent short-term tax, and a 0.1 percent securities transaction tax on delivery-based trades.
- •Competing financial hubs like Hong Kong, Singapore, and Taiwan offer more favourable capital gains tax treatments for foreign portfolio investors.
- •While equity taxes and STT generated Rs 1.81 lakh crore in FY2024-25, policymakers must balance fiscal revenue needs with long-term market competitiveness and capital formation.
- •A calibrated reform agenda should focus on reviewing long-term capital gains, evaluating the cumulative impact of STT, and ensuring policy predictability for international investors.
Key Questions Answered
Foreign portfolio investors have withdrawn Rs 4.74 lakh crore from Indian equities since January 2025, which exceeds the Rs 3.86 lakh crore invested over the nine-year period from 2016 to 2024.
India currently taxes long-term capital gains on listed equities at 12.5 percent on gains exceeding Rs 1.25 lakh, and short-term capital gains at 20 percent, subject to applicable surcharges, cesses, and treaty provisions.
In FY2024-25, securities transaction tax (STT) and long-term capital gains tax on equities collectively generated approximately Rs 1.81 lakh crore for the government.
