How could SBI economists' calls for tax changes affect the Government of India?
Government of India may adjust tax framework to stabilize capital flows SBI economists have called for several policy adjustments to stabilize foreign capital flows into India. The proposals include abolishing the 12.5 per cent long-term capital gains (LTCG) tax on equities and extending the required holding period to two or three years to encourage long-term investment. Additionally, the report suggested streamlining the repatriation of export proceeds to occur within approximately six months to strengthen foreign currency inflows.
- Effect
- Mixed
- How direct
- Stated in the reporting
- When
- Within weeks
- The story
- Mostly repetition
How it reaches Government of India
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Economists at SBI called for changes to India's tax policy, specifically proposing the abolition of the Long-Term Capital Gains (LTCG) tax on equities. The proposal also suggests extending the required holding period for equity investments to two or three years. This recommendation comes amid significant foreign portfolio investor outflows, which reached Rs 3.04 lakh crore in 2026.
The full event1independent outlet -
SBI Research proposed abolishing the 12.5 per cent LTCG tax on equities and extending the holding period to two or three years to anchor volatile foreign capital flows. They also suggested streamlining the repatriation of export proceeds within around six months to strengthen foreign currency inflows.
1 report connects these two. Brind only summarizes; follow a link to read the reporting itself.
- thehindubusinessline.com Monday
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legislative, executive and judiciary authority of India
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The facts so far
As reported. Each one links to where it comes from.
- Foreign investors withdrew Rs 3.04 lakh crore from Indian equities in 2026thehindubusinessline.com
- Foreign portfolio investors currently pay the 12.5 per cent LTCG tax on equity investmentsthehindubusinessline.com
- SBI suggested extending the holding period to say 2-3 years and abolishing the long-term capital gains tax for equitythehindubusinessline.com
- SBI Research suggested streamlining the repatriation of export proceeds within a reasonable period of around six monthsthehindubusinessline.com
Why it matters
The stability of India's capital flows is critical for its economic health. High FPI outflows, which reached Rs 3.04 lakh crore in 2026, put pressure on the rupee and indicate investor uncertainty. The government must balance the need to attract long-term foreign capital against maintaining fiscal stability and existing tax structures.
These recommendations come amid global market shifts, including elevated crude oil prices and higher US bond yields, which are weighing on investor sentiment. The proposals aim to counter these external pressures by making the Indian equity segment more attractive and ensuring timely foreign currency inflows from exporters.
What we don't know yet
- Will the government review the current 12.5 per cent LTCG tax rate on equities?
- How will the government address the need for greater clarity on withholding tax for ECBs?
Is this still moving?
- Reports
- 4
- Developments
- 1
- Repetition
- 75%
What would change this answer
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Who else could feel it
Other possible ripples from the same event.
- parliamentPossibleParliament may need to consider major tax reforms to stabilize foreign investment.
- central governmentPossibleCentral government may consider tax changes to anchor foreign investment flows
- Reserve Bank of IndiaPossiblePolicy changes may reduce pressure on the rupee by anchoring foreign investment.
Reporting
- thehindubusinessline.comMonday
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