NEW DELHI: Finance minister Nirmala Sitharaman on Monday said the government would consider concerns raised by foreign portfolio investors (FPIs) over India’s capital gains tax structure, amid growing demands for a reduction in long-term capital gains (LTCG) tax on equities.Responding to a question on whether the upcoming Budget would create a more favourable environment for foreign investors and encourage dollar investments, Sitharaman acknowledged the concerns of both retail investors and participants in the equity market.She said taxation was only one of several factors influencing investment decisions.“Taxation is just one part of it, but I quite appreciate and also realise the sensitivity and the anxiety which is prevailing among retail investors and also among equity participants,” she said at the Financial Express Leadership Awards 2026.The finance minister pointed out that India’s tax structure was similar in 2023-24, when the country recorded its highest foreign investment inflows. However, she acknowledged that market conditions had changed since then, with net outflows by foreign institutional investors (FIIs) rising before showing signs of recovery.“The taxation structure was what it is today, even in 2023-24, when we had good inflow into the country. 23-24 saw the highest. The taxation was similar even then. Nothing differently was done for drawing investments. But of course, the situation is very different now. Circumstances have changed. Challenges have grown. More net FII outflows have happened. It’s started resuming now. They’ve started coming back now. So I know that circumstances have changed and therefore voices of concern are louder. I quite appreciate that. I’ll consider all this,” Sitharaman said.She added that India needed capital to sustain economic growth of over 7%, and acknowledged that investors’ concerns needed to be heard.“Because at a time where our growth is very important, where people are putting their very best, that we are able to see sustained seven-plus growth. In order to keep that intact, we need capital… I wouldn’t want to say more at this stage, but I recognise the voice,” she said.Sitharaman also highlighted the government’s efforts to deepen and widen the bond market, while acknowledging that investors were seeking greater support for equity markets.Her remarks come amid growing calls for a review of the LTCG tax regime. The Securities and Exchange Board of India (SEBI) has reportedly recommended tax relief for both foreign and domestic investors.According to a Reuters report, SEBI has asked the government to consider scrapping LTCG tax on equity investments by foreign investors. It has also reportedly proposed tax relief for domestic mutual fund investors switching from one scheme to another.Under the reported proposal, investors would not have to pay LTCG tax when transferring their existing mutual fund investments to other schemes. The recommendations have been submitted ahead of the Union Budget scheduled for February, the report added.
