SBI Research calls for scrapping LTCG tax on equities amid record FPI outflows
The lender’s research arm has proposed policy changes to encourage longer-term foreign investment and strengthen foreign currency inflows into India
SBI Research has proposed scrapping the long-term capital gains (LTCG) tax on equities amid significant foreign portfolio investment (FPI) outflows. This move could help investors stay invested for a longer period. Currently, FPIs pay a 12.5 percent LTCG tax on equity investments. The Union Budget 2026 maintained this rate, despite the significant outflows this year.
Foreign investors withdrew Rs 44,166 crore from Indian equities in October, totaling over Rs 3 lakh crore for the year, according to the data. The primary drivers of FPI selling include the absence of AI-themed stocks and rising yields in other markets, particularly the US, where risk-free returns are relatively higher. SBI Research also suggests streamlining the repatriation of export proceeds within six months to enhance the stability of India's external accounts.
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