Sebi recommends scrapping long-term capital gains tax for foreign investors

The Securities and Exchange Board of India (Sebi) has recommended eliminating the long-term capital gains tax imposed on foreign investors, marking a significant shift in the regulatory stance on foreign capital participation in Indian markets.

The recommendation is intended to make India's investment climate more competitive and attract greater foreign portfolio inflows. By reducing the tax burden on long-term foreign investments, policymakers aim to position India as a more attractive destination relative to regional competitors.

Sebi's proposal comes several months before the government's annual federal budget scheduled for February, providing the administration adequate time to deliberate on the proposal. However, the recommendation is non-binding, and any decision to implement the change will ultimately rest with the government and finance ministry.

The move reflects ongoing efforts by Indian authorities to strengthen the country's capital markets and encourage sustained foreign investment participation. Foreign portfolio investors have remained significant contributors to Indian equity markets, and policy measures that enhance their returns could potentially boost inflows during periods of global market volatility.

Final implementation of the proposal would require formal budgetary action and legislative approval if any statutory changes are necessary. Market participants are expected to monitor government communications closely for signals regarding the administration's stance on the recommendation.