India's LTCG Tax Cut Discussed Amid Modest Foreign Inflow Prospects
Analysts at JM Financial said eliminating the long-term capital gains tax for foreign investors could add $3-5 billion to Indian equity inflows, but warned it would not reverse the $64 billion outflow driven by oil prices and valuation concerns. Finance Minister Nirmala Sitharaman said the government would review LTCG tax relief ahead of the 2027 budget, cautioning against preferential treatment of foreign investors. The Securities and Exchange Board of India (SEBI) has submitted non-binding recommendations to scrap the 12.
5% tax on foreign portfolio holdings and to ease mutual-fund scheme-switch rules, pending government approval. Earlier, Jefferies analysts suggested the cut could lure foreign money into large-cap stocks, while other analysts argued that high LTCG tax was not the main cause of foreign outflows. The Indian Express reported that the government was weighing a reduction in the tax as part of efforts to revive equity market participation.
