Government Open to Reviewing Capital Gains Tax Amid FPI Outflows
FM Sitharaman said the government is open to views on cutting capital gains tax to attract foreign portfolio investors back to Indian markets.
Finance Minister Nirmala Sitharaman said the government is open to stakeholder views on reducing the capital gains tax on stock market investments, with the aim of making Indian markets more attractive to foreign portfolio investors (FPIs).
Foreign investors have been withdrawing money from Indian equities, pressured by higher capital gains taxes, a weaker rupee, and a global shift in where funds are being allocated. Capital gains tax is levied on the profit made from selling assets such as shares.
The Finance Minister said the government is always willing to listen on this and other issues, signalling possible future changes. Any reduction would need to balance market competitiveness against the revenue the tax generates for the exchequer.
Key Points to Remember
- Govt open to reviewing capital gains tax on equities
- Aim: attract Foreign Portfolio Investors (FPIs)
- FPIs exiting due to higher taxes, weak rupee, global reallocation
- Capital gains tax = tax on profit from selling assets
- Trade-off: market competitiveness vs tax revenue
Exam Relevance
Relevant for UPSC Prelims (Economy — Taxation, Capital Markets), Banking exams.
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