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SEBI Recommends LTCG Tax Exemption For Foreign Investors
Sentiment: NeutralHigh Priority
What Happened?
The Securities and Exchange Board of India (SEBI) has proposed exempting foreign investors from the 12.5% long-term capital gains (LTCG) tax on equity investments held over a year. This recommendation aims to enhance the attractiveness of Indian equity markets.
Key points
- SEBI's recommendation is part of its pre-budget proposals ahead of the Union Budget in February.
- Currently, foreign investors face a 12.5% LTCG tax on equities held for over a year.
- Investors holding equities for less than 12 months are subject to a 20% short-term capital gains tax.
- Brokerage firm Jefferies noted that reducing capital gains taxes could enhance market attractiveness for foreign investors.
- IIFL estimates that scrapping the capital gains tax could increase foreign investors' returns by 2.3 percentage points.
Key insights
- A lower tax burden may lead to increased foreign investment in Indian equities.
- The proposal could help India compete more effectively with other emerging markets for global investment.
- Improved post-tax returns for retail investors may encourage greater participation in financial markets.
Why it matters
This proposal could make Indian equity markets more appealing to foreign investors, potentially increasing foreign capital inflows.
Source
Times Now
