'Will see what we can do': Sitharaman to consider FPIs' concerns over LTCG tax

Finance minister Nirmala Sitharaman on Monday said the government would consider concerns raised by foreign portfolio investors (FPIs) over India's capital gains tax structure, amid growing demands for a reduction in long-term capital gains (LTCG) tax on equities.

Sitharaman acknowledged that the government was aware of foreign investors' concerns over India's tax structure, but said taxation was only one of several factors influencing investment decisions. She noted that the tax structure had remained unchanged since 2023-24, when India recorded strong foreign investment inflows. However, market conditions have since changed, with foreign institutional investors (FIIs) reporting significant outflows and concerns over the tax regime becoming more pronounced.

“These are very delicate matters, and a lot of business and commercial acumen will have to come into play,” the finance minister said at the Financial Express Leadership Awards 2026. “The taxation structure was what it is today even in 2023, when inflows were at record highs. Today, the circumstances have changed. FII outflows have happened, and voices of concern are louder,” Sitharaman said.

She added that the government had not introduced any special measures to attract foreign investment when inflows were strong in 2023. However, she acknowledged that the challenges facing investors had since increased. “Nothing differently was done for drawing investments. But of course, the situation is very different now. Circumstances have changed. Challenges have grown,” she said.

Sitharaman also highlighted the government's efforts to deepen and widen the bond market in recent years, while acknowledging that investors were seeking greater support for equity markets. “I wouldn't want to say more at this stage, but I recognise the voice,” she said, referring to investors' concerns, adding that "I will consider all this."

The remarks come amid growing calls for a review of the LTCG tax regime, with the Securities and Exchange Board of India (SEBI) reportedly recommending tax relief for foreign and domestic investors. According to a Reuters report, SEBI has asked the government to consider scrapping LTCG tax on equity investments by foreign investors. It has also reportedly proposed tax relief for domestic mutual fund investors who switch from one scheme to another.

Under the reported proposal, investors would not have to pay LTCG tax when moving their existing mutual fund investments to other schemes. The recommendations have been submitted ahead of the Union Budget scheduled for February, the report added.