'We should adopt global standards': Capital Mind CEO on India's capital gains tax on FPIs

Capital Mind CEO Deepak Shenoy has weighed in on the ongoing debate over India’s capital gains tax on foreign portfolio investors (FPIs), backing calls for its removal and advocating for global standards.

Responding to Helios Capital founder Samir Arora’s strong criticism of the policy, Shenoy stated, “It’s useful to remove Indian cap gains taxes from FPIs. We should adopt the global standards on this. Of course also happy to remove it from local investors :) but we are not so special that FPIs will come to India as the only country charging FPIs cap gains tax.”

His remarks come amid growing concerns that the taxation policy is driving foreign investors away. Arora, speaking at the Business Standard Manthan Summit 2025, had called the government’s decision to levy capital gains tax on FPIs its “biggest mistake.”

“The biggest mistake they (the government) have made, the biggest souring of sentiment, and reality which they have to accept is capital gains tax in India, particularly the foreign investors, is 100 per cent wrong,” Arora had stated. He pointed out that major global investors, including Foreign Sovereign Funds, Pension Funds, Universities, and High Net Worth Individuals (HNIs), were being unfairly taxed in India without tax set-offs in their home countries, while also facing currency risks.

Over the past five months, foreign institutional investors (FIIs) have sold off Indian equities worth over ₹1 trillion, reflecting growing dissatisfaction. Arora noted that India collected around $10-11 billion in capital gains tax in FY23, but argued that scrapping the tax altogether would benefit markets and foreign investors.

In the Union Budget 2024, Finance Minister Sitharaman increased the long-term capital gains (LTCG) tax on equities from 10% to 12.5%. The move, intended to boost government revenue, was widely criticised for discouraging long-term investments in the stock market and adding to the concerns of both domestic and foreign investors.

The conversation around capital gains taxation has gained momentum, with Gurmeet Chadha, CIO at Complete Circle, also advocating a policy change. In a direct appeal to Finance Minister Nirmala Sitharaman, Chadha suggested increasing the tenure for long-term capital gains (LTCG) tax exemption on equities to two years while maintaining the short-term capital gains (STCG) tax.

“Honourable FM Sitharaman, one request—increase tenure of LTCG for equities to 2 years & make tax nil. Let STCG tax remain as it is. We will gain immensely in long term in form of - FDI, risk capital to fund our capex, more value for PSUs n ultimately jobs. In short run, higher STT will make up for revenue also,” he stated.