Foreign portfolio investors and Indian units of overseas trading companies have urged the Securities and Exchange Board of India and the central government to reduce the securities transaction tax. They argue that the levy, along with capital gains tax, is hurting investor sentiment and discouraging participation in Indian markets.
According to people familiar with the matter, the appeal was made during recent discussions with regulators. High‑frequency trading firms highlighted that the current tax structure is making operations less viable. They warned that if the situation continues, they may be forced to shift trading activities offshore, which could reduce liquidity and efficiency in domestic markets.
The Economic Times report noted that these firms also raised concerns about Reserve Bank of India leverage rules. They said the restrictions on leverage would further limit their ability to trade effectively in India. This, combined with the existing tax burden, could push more global players to look for alternative markets.
Market experts believe that reducing the securities transaction tax could improve competitiveness and attract more foreign capital. They point out that India’s growing economy needs deeper and more efficient markets to sustain investment flows. The government and regulators are expected to review these demands, though no decision has yet been announced.
