UAE NRIs hope for lower taxes on India investments: What you could save

UAE Indians investing in Indian stocks may retain a larger portion of their earnings if the Indian government reduces investment taxes, according to Finance Minister Nirmala Sitharaman’s remarks at a recent forum. Investors are hopeful that tax review discussions will take place ahead of the upcoming Budget. The Nifty 50, a benchmark index of Indian shares, saw a 1.6% increase as a result of this positive sentiment.

Two key taxes impact investors – securities transaction tax (STT) and long-term capital gains tax. STT is levied on both purchases and sales of certain investments, with a rate of 0.1% on each transaction. In contrast, long-term capital gains tax applies to the gains made from selling investments after holding them for over 12 months, with a 12.5% rate on profits exceeding Rs125,000.

Sitharaman signaled openness to hearing investors’ concerns about these taxes but refrained from making any concrete promises. SBI Research has proposed scrapping the long-term capital gains tax and introducing a longer holding period before triggering the tax. Though this remains a recommendation, not a policy, the suggestion has boosted investor confidence.

For example, if an NRI sells Indian shares after more than a year, with a profit of Rs500,000, and no other adjustments, the tax bill would be Rs48,750 after accounting for the Rs125,000 allowance, 4% health and education cess, and no surcharge. This amount excludes brokerage and other transaction costs. Removing either tax could substantially reduce the overall tax burden for NRIs.