We will consider the call for review of LTCG tax: Finance minister Nirmala Sitharaman

The Centre would 'consider' the request from foreign investors to review the structure of taxes levied on equity capital gains, Finance Minister Nirmala Sitharaman said Monday, highlighting the role of overseas funds in the capital markets that are seen as crucial to sustaining rapid economic growth and boosting efficiency in financing.

“I know the circumstances have changed and, therefore, the voices of concern are louder,'' the finance minister said at the Financial Express Leadership Awards 2026, in reference to reports that her administration has received suggestions to review the levies on long-term capital gains (LTCG) for overseas investors. “I quite appreciate that. So, I'll consider all this because where our growth is very important, where people are putting their very best, we are able to see sustained seven-plus growth.''

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Sitharaman said the taxation structure has not changed from 2023-24, when foreign inflows into Indian equities were the highest. But she acknowledged that the situation is different now and that circumstances have changed. Overseas funds have withdrawn a net $30.9 billion so far this calendar year, following net withdrawals of nearly $19 billion through 2025.

Simultaneously, US bond yields have surged to their highest this millennium, topping levels last seen during the peak of the Global Financial Crisis. Yield on the US 10-year benchmark bond has consistently been in the vicinity of 5% lately, pressuring emerging market currencies and reducing the attractiveness of assets priced in currencies other than the US dollar.

“In the last few years, we have been placing a lot of emphasis on the bond market, deepening it, widening it. Now we also have this voice which says, come on, even equity needs that kind of work and support,” Sitharaman said, while stopping short of making immediate commitments to reduce taxes on capital gains. “So, I wouldn't want to say more at this stage. But I recognize the voice.”

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FPI Withdrawals

Foreign portfolio investors (FPI) have argued that India is among the few major markets that levy capital gains tax on foreign portfolio investors. Some commentators have attributed persistent FPI sales to India's relative underperformance among emerging markets lately.

Under the current regime, short-term capital gains from listed shares held for up to 12 months are taxed at 20%. Gains on shares held for more than 12 months are taxed as long-term capital gains at 12.5%.

On the ongoing dispute between Tata Trusts and directors of the holding company of the Tata Group, Tata Sons Sitharaman said these are very delicate matters where a lot of commercial and business acumen will have to work.

“This is a very critical component to the Indian economy and therefore it has to be amicably settled among themselves so they talk it out to make sure that it comes back quickly to some normalcy. It cannot be spilled out like this in public. And for the maturity of that leadership, we would like to have this seen settled sooner. That's the view,” she said.

Sitharaman said she appreciates and realizes the sensitivity prevailing among retail investors and also among equity participants particularly but said that the tax issue will have to take into consideration Indian investors as well.

“ (If you) say FM said (roll out) a red carpet for the dollar…after which Indian investors would say, already there's a bias for foreign investors. You didn't want a red carpet for the Indian rupee. So, on that ground, I don't answer you,” Sitharaman said.

Capex Centrality

Separately, she said the Centre will continue to rely on capital expenditure as a key driver of economic growth while maintaining a firm commitment to fiscal consolidation, highlighting her government's strategy of using public investment to crowd in private sector spending.

“CapEx is a very important component of our growth strategy,” Sitharaman said during a fireside chat with HSBC India chief executive Hitendra Dave.

The minister said capital spending by the government encourages private companies to expand and invest.

“Because it’s such a kind that the private sector is also going to come in to expand capacities or establish more capacities, it’s important for the government to push through with capital expenditure,” she said. “We find that in the last four to five years, it has shown very good results.”

Sitharaman highlighted that greater public investments have generated stronger economic returns over time.

“The multiplier has actually grown,” she said. “And it gives confidence that the government is not going to sit back and watch whether growth is growing without doing much.”

The minister’s remarks come at a time when India remains one of the world’s fastest-growing economies at 7.8% despite ongoing geopolitical conflicts, elevated interest rates and trade tensions.

While reiterating the Centre’s commitment to growth-supportive spending, Sitharaman stressed expenditure decisions would continue to be guided by fiscal discipline.

“We have to keep an eye on fiscal intensity,” she said. “We need to be fiscally prudent.”