India’s securities regulator has proposed ending a 12.5% tax on foreign portfolio investors’ long-term equity gains, Reuters and NDTV Profit reported, a change that would reduce their tax bill if adopted.
Reuters and NDTV Profit also reported a proposal to make transfers across mutual fund schemes tax-neutral after investors have held units for over a year.
Reuters, citing two people with direct knowledge, reported that SEBI submitted the recommendations privately ahead of the 2027-28 Union Budget. The proposals are nonbinding, and the government would decide whether to adopt them, Reuters said.
If adopted, the measures would benefit FPIs and mutual fund investors switching schemes after more than a year. The reports did not estimate their fiscal impact. EconoTimes previously covered a reported SEBI recommendation to end the tax on FPIs’ equity gains; the current reports also describe the mutual fund proposal and concerns about trading costs.
NDTV Profit reported that SEBI flagged high trading costs in Indian equity markets, including the securities transaction tax (STT) charged on trades. Reuters separately reported that SEBI described India’s transaction costs as among the highest across jurisdictions, a ranking reported only by Reuters.
The Finance Ministry’s 2024 FAQ says the LTCG rate for relevant listed financial assets rose from 10% to 12.5%, effective July 23, 2024. The annual exemption limit for those assets also increased to ₹1.25 lakh, according to the FAQ.
The reports did not specify whether SEBI separately recommended changing STT or give eligibility details for mutual fund switches beyond the holding-period threshold. Reuters identified the February 2027 budget as a possible point for a government decision.
