Finance Minister Nirmala Sitharaman has indicated that the government is aware of concerns raised by investors regarding long term capital gains (LTCG) tax, but stopped short of announcing any relief for foreign institutional investors (FIIs) in the upcoming Budget.
Speaking at the FE Leadership Awards, Sitharaman said the government recognises the concerns and anxieties of retail investors and stock market participants. When asked whether Budget 2027 would offer tax benefits to attract more foreign investments, she said the government would listen to stakeholders, assess the situation and take appropriate decisions.
The discussion comes as investors continue to debate the impact of LTCG tax on market returns. Under the current framework, gains from listed shares and equity mutual funds above the exemption limit are taxed at 12.5%. The tax rate was raised from 10% to 12.5% in the July 2024 Budget.
Sitharaman noted that India had witnessed strong foreign capital inflows earlier under a similar tax structure. She added that while foreign investor outflows had increased recently, the trend is now showing signs of reversal, with overseas investors gradually returning to Indian markets.
She also highlighted the importance of capital inflows for sustaining India’s economic growth above 7%. However, she avoided making any commitment on a possible LTCG tax cut, leaving investors to wait for Budget 2027 for further clarity.