LTCG tax relief on cards? FM acknowledges FPI concerns as SEBI, FICCI push for reforms in Budget 2027
Finance Minister Nirmala Sitharaman acknowledged concerns foreign portfolio investors (FPIs) and equity market participants are having about the investment environment in India, on Monday.
This comes amid the Federation of Indian Chambers of Commerce and Industry (FICCI) asking the finance ministry to consider exempting taxes on long-term capital gains (LTCG) for listed companies. The FICCI has also asked the government to bring forth a capital gains tax regime that will be stable for a decade, change taxation rules for foreign investors, and also remove some specific tax deduction at source (TDS) in the Budget.
The FM said that the central government does recognise the changing circumstances across the world and will take their feedback into due consideration as India tries to maintain its growth rate about 7 per cent.r
Sitharaman made the remarks while speaking at the Financial Express Leadership Awards 2026. Herein she said that taxation is one aspect in order to attract foreign investment. She also noted that the tax structure currently is similar to as it was in 2023-24 when India was seeing strong foreign capital investments.
"Nothing differently was done for drawing investments. But of course, the situation is very different now. Circumstances have changed. Challenges have grown," ANI quoted her as saying, as the FM acknowledged that net FII outflows had increased, although inflows had started recovering.
Sitharaman said that India does require capital, especially equity investments, in order to sustain the economic growth momentum.
She said India required capital, particularly equity investments, to sustain its growth momentum. While the government had focused on deepening and widening the bond market in recent years, concerns were now being raised about the need for greater support for equity markets.
"I wouldn't want to say more at this stage, but I recognise the voice," she said, referring to investor concerns.
Speaking on the domestic economic conditions, Sitharaman said she expects the consumption story of India to continue remaining intact, citing the latest GST collection data to make her point.
She also said that India's consumption and demand became more visible in the wake of the next-generation GST reforms, which is encouraging companies to consider fresh investments,
Albeit choosing sectors selectively, the finance minister said the private sector investment is also picking up, the FM said, attributing this to greater demand visibility in the market.
While speaking on employment, the finance minister said a bridge needs to be built between the skills of young graduates and industry requirements. She also said that the Indian government is trying to work on skilling initiatives, as is reflected in her last two budgets. Sitharaman thinks it is crucial to prepare workera to use AI across industries, even MSMEs.
She defended the production-linked incentive (PLI) approach of the government, saying that companies received incentives based on additional production. While the scheme had delivered results in some sectors, she acknowledged that its performance had been weaker in others and would need to be examined.
Reuters has reported that market regulator SEBI has asked the Indian government to consider if LTCG tax on foreign investors' equity investments can be done away with. SEBI has also reportedly asked if domestic mutual fund investors can get a tax relief while switching from one scheme to another.
FICCI has also asked the government to consider scrapping LTCG for listed equities, arguing that since the LTCG tax was reintroduced in 2018 without the withdrawal of the securities transaction tax (STT), this has to led to dual taxation on equities.
With ANI inputs
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