India considers LTCG tax removal amid investor outflows

Indian Finance Minister Nirmala Sitharaman has indicated that the government is considering suggestions regarding the potential removal of Long Term Capital Gains (LTCG) tax during pre-budget discussions. This statement follows concerns from investors regarding how taxes on profits impact real earnings.

In a related development, economists at SBI Research have formally suggested that the government abolish the LTCG tax to encourage long-term investment and mitigate market volatility. The report highlights significant outflows from the Indian stock market, noting that Foreign Portfolio Investors (FPIs) withdrew 44,166 crore rupees in October.

SBI Research proposes increasing the required investment holding period to two or three years and eliminating the current 12.5% LTCG tax rate to stabilize capital flows and reduce pressure on the Indian rupee. While these suggestions aim to curb the impact of sudden foreign capital exits, no final decision has been announced by the government.