'More taxes would mean lesser...': Top fund manager urges govt to roll back capital gains tax hike

Complete Circle CIO Gurmeet Chadha on Monday urged the government to reconsider the recent capital gains tax hike, warning that increased taxation could lead to lower capital gains, a negative wealth effect, and ultimately, reduced tax collection.

"Capital gain tax increase of 2.5% should be revisited. More taxes would mean lesser capital gains, negative wealth effect and eventually lesser tax collection (Even real estate is now seeing moderation). Biggest stakeholder in markets is the govt. It owns 10% directly thru PSUs and collects over 1 lac cr thru taxes - STT, tax on dividend, buy back n capital gains. Less is more!!" Chadha posted on X.

His remarks come amid heightened volatility in Indian stock markets, fueled by a mix of foreign institutional investor (FII) outflows, global tensions, and policy changes. On Monday, the Sensex managed to snap an eight-day losing streak, closing 57 points higher at 75,996.86 after dipping as much as 644 points earlier in the session.

FII selling remains a key pressure point for Indian markets. Foreign portfolio investors (FPIs) offloaded equities worth ₹4,294.69 crore on Friday, bringing total FII outflows in 2025 close to ₹1 lakh crore. February alone has seen outflows of ₹21,272 crore, driven by global uncertainties, including new US import tariffs. This follows ₹78,027 crore in net outflows in January, making FIIs net sellers across almost all sectors, barring chemicals, media, and telecom.

Finance Minister Nirmala Sitharaman on Monday addressed concerns over FII exits, stating that profit-booking was a sign of strong returns. "The Indian economy today has an environment in which investments are earning good returns and profit booking is also taking place," she said during a post-Budget interaction in Mumbai.

Finance Secretary Tuhin Kanta Pandey acknowledged that global volatility often prompts FIIs to return to their home markets, primarily the US, but asserted that India remains the fastest-growing major economy and is set to sustain its growth trajectory. 

The 2024 Budget had raised capital gains tax from 10% to 12.5%, triggering concerns among investors. Finfluencer Akshat Shrivastava cautioned that future increases could significantly impact long-term investments and retirement planning. "You are doing your SIPs today, thinking capital gains tax will stay at 12.5%," Shrivastava wrote on X, highlighting past increases.

"15 years ago, it was 0. 1 year ago, it was 10%. Now, it is 12.5%. Who knows what this tax rate would be in 10 years' time? The fact is: if you are a hard-working honest person, your chances of building wealth in India is close to 0. You can do your SIPs for life, working 70-70 hours a day. The growth on your portfolio might get offset by = taxation + inflation," he added.

Shrivastava advised high earners to adopt efficient tax structuring to mitigate risks and build wealth. "If you have more than ₹50-60L of operational income a year, get tax structured efficiently," he suggested.