Finance Minister discusses capital gains tax debate amid foreign investor exit

Finance Minister Nirmala Sitaraman attributed the mass exit of foreign investors from Indian stocks to the ease of liquidity and availability of funds from domestic retail investors. Regarding tax cuts on capital gains, she stated it is a healthy debate, increasing anticipation for potential reductions in the Long-Term Capital Gains tax of 12.5% in the upcoming Budget. Vivek Kaul questioned whether tax cuts would revive SIP returns or if they might encourage foreign investors to sell more.

The debate over reducing or abolishing the Long-Term Capital Gains tax is seen by some as a potential catalyst to bring back foreign portfolio investors and revive Indian stocks. The Finance Minister’s comments reflect the ongoing market discussion regarding the primary drivers of foreign investment flows.