SBI Research calls for abolition of LTCG tax on equities to boost foreign capital inflows
According to SBI Research, removing the long-term capital gains tax on equities could revitalize investment levels. The report emphasizes extending the holding period to two to three years as a strategy to boost investor morale. Faced with foreign portfolio outflows, the need for policy reforms is clear.
The State Bank of India (SBI) Research has proposed abolishing the long-term capital gains (LTCG) tax on equities and extending the holding period to two to three years in order to attract more foreign capital and improve investor sentiment in the Indian equity markets. The persistent outflows of foreign portfolio investors (FPIs) from Indian equities, totaling Rs 3.51 lakh crore between 2021 and September 2026, indicate weakening investor participation and the need for policy interventions to make equities more appealing to global investors.
SBI Research emphasized the importance of structural measures by the government and suggested that aligning with market trends and offering incentives on taxation/cap gains could enhance the competitiveness of Indian equities and encourage foreign investment. The report also recommended creating a more favorable taxation framework for investors willing to hold equities for a longer period, suggesting a holding period of around three years to attract more stable investment flows.
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