Sitharaman Acknowledges Calls for Equity Tax Relief; SEBI Recommends Scrapping LTCG for Foreign Investors
Union Finance Minister Nirmala Sitharaman has acknowledged growing calls for tax relief on equity investments, saying she recognises investors’ concerns and is willing to hear their views before considering any decision. Speaking at an HSBC India event in Mumbai on Monday, she said India needs equity capital to sustain economic growth but did not commit to any changes in the existing tax structure.
Her remarks came hours after reports that the Securities and Exchange Board of India (SEBI) had recommended removing long-term capital gains (LTCG) tax on foreign portfolio investors (FPIs) as part of its confidential, non-binding pre-Budget proposals to the government.
According to Reuters, SEBI has also proposed tax relief for domestic mutual fund investors by exempting them from LTCG tax when switching investments from existing mutual fund holdings to new schemes, subject to the proposed conditions. The recommendations are not binding, and the final decision rests with the Finance Ministry.
Currently, long-term gains on listed equities held for more than one year are generally taxed at 12.5%, while short-term capital gains are taxed at 20%, subject to applicable conditions. Foreign investors have increasingly raised concerns over India’s equity taxation and transaction costs amid relatively weak market performance.
The proposal comes after foreign portfolio investors sold approximately $31 billion worth of Indian equities in 2026, marking record annual selling, according to Reuters. Jefferies has said that reducing capital gains taxes could improve post-tax returns, potentially encourage foreign investment inflows and support the rupee. India has already removed LTCG tax for foreign investors in specified debt instruments earlier this year.
However, any decision to remove equity LTCG taxation would also have revenue implications. Capital gains tax collections from equities generated approximately ₹1.3 lakh crore in FY25, according to the figures cited in the reports. Sitharaman has not announced any tax changes, with the next Union Budget expected in February 2027.
The Finance Minister also addressed the government’s capital expenditure strategy, stating that public investment would continue until private companies expand their own capacity. The FY27 Union Budget has allocated ₹12.22 lakh crore for capital expenditure, of which approximately 53.6% had been utilised during April-September 2026.
The Centre’s fiscal deficit reached 42.1% of the FY27 annual target during the first half of the financial year. Goldman Sachs expects the government to meet its full-year fiscal deficit target of 4.3% of GDP through expenditure reprioritisation, although higher energy prices and potential subsidy requirements remain risks. ICRA has also flagged the possibility of subsidy pressures if elevated global commodity prices persist.
Sitharaman Urges Amicable Resolution of Tata Leadership Dispute
Separately, Sitharaman urged the Tata Group to resolve its ongoing leadership dispute amicably and within the organisation, highlighting the conglomerate’s global brand and contribution to India’s economy. Her remarks were reported by Bloomberg and come amid continuing disagreements between Tata Trusts and the Tata Sons board.
Tata Trusts chairman Noel Tata has challenged the validity of the board’s September 17 decision to reappoint N. Chandrasekaran as Tata Sons chairman, alleging procedural irregularities. Tata Trusts, which holds approximately 66% of Tata Sons, has also opposed a proposed public listing of the holding company.
The dispute has raised questions over the group’s governance, leadership structure and future strategic direction. Tata Sons’ board and Tata Trusts have differing positions on the holding company’s listing and other governance matters.
The issue also triggered a political exchange between the Finance Minister and Leader of Opposition Rahul Gandhi. Gandhi alleged that the Tata Group was being “criminally destroyed”, while Sitharaman accused him of politicising commercial and legal matters. The Finance Minister did not offer to mediate in the dispute but emphasised the importance of an amicable settlement that would allow the conglomerate to return to normal functioning.
Has SEBI recommended removing LTCG tax for foreign investors?
Yes. SEBI has reportedly recommended removing long-term capital gains tax on foreign equity investors as part of its confidential, non-binding pre-Budget proposals.
Has the government approved the proposed LTCG tax exemption?
No. The recommendation is non-binding, and the final decision rests with the Union Government.
What did Nirmala Sitharaman say about equity tax relief?
She acknowledged investors’ concerns and said she was willing to hear their views. However, she did not announce or promise any tax changes.
How much have foreign investors sold in Indian equities in 2026?
Foreign investors have sold approximately $31 billion worth of Indian stocks this year, according to Reuters.
What is India’s current LTCG tax rate on listed equities?
Qualifying long-term capital gains on listed equities are generally taxed at 12.5%, while short-term capital gains are taxed at 20%, subject to applicable conditions.
What tax relief has SEBI proposed for mutual fund investors?
SEBI has reportedly proposed exempting domestic mutual fund investors from LTCG tax when switching existing investments into new schemes, subject to the proposed conditions.
What is India’s FY27 capital expenditure target?
The Union Budget has allocated ₹12.22 lakh crore for capital expenditure in FY 2026-27. Approximately 53.6% had been utilised during April-September.
What is India’s FY27 fiscal deficit target?
The government has budgeted a fiscal deficit of 4.3% of GDP for FY27. The deficit had reached 42.1% of the annual target by the end of September 2026.
Why did Sitharaman comment on the Tata Group dispute?
She highlighted the conglomerate’s global brand and economic contribution and urged its stakeholders to resolve the leadership dispute amicably within the group.
What is the dispute between Noel Tata and Tata Sons?
Noel Tata, chairman of Tata Trusts, has challenged the Tata Sons board’s September decision to reappoint N. Chandrasekaran as chairman, alleging procedural irregularities. Tata Trusts has also opposed a proposed listing of Tata Sons.
