Govt Open to FPI Tax Review, Cites Economic Growth

Union Finance Minister Nirmala Sitharaman stated that the Indian government is receptive to feedback regarding the nation’s tax policies in response to mounting unease among Foreign Portfolio Investors. The Minister acknowledged that while the current tax structure previously supported record-breaking investment levels, shifting market conditions necessitate a fresh look at policy support.

Shifting Market Realities and Capital Needs

Sitharaman highlighted that the prevailing tax structure is identical to the framework in place when the country saw record investment inflows, but circumstances have since evolved. Key factors driving this reassessment include:

Foreign portfolio investors withdrew approximately Rs 3.08 lakh crore from Indian equities between January and September 2026.

Reports indicate that the Securities and Exchange Board of India has recommended abolishing the long-term capital gains tax for foreign investors.

The regulator also proposed exempting domestic mutual fund investors from LTCG tax when liquidating existing holdings to reinvest in new funds.

Sitharaman emphasized that sustaining India’s economic growth target of over 7% requires robust capital and equity support. She recognized calls from market participants for equity to receive policy backing similar to the focus the government has placed on deepening and widening the bond market in recent years.

Broader Fiscal and Regulatory Goals

The Finance Minister reiterated that the government remains committed to public capital expenditure as a primary growth driver until private sector investment gains sufficient momentum. These ongoing discussions are part of a broader government effort to foster trust among taxpayers and businesses through continuous policy reforms.