What happened
India’s markets regulator, Sebi, has recommended that the government remove long-term capital gains (LTCG) tax on foreign investors, according to a Reuters report carried by Mint and Business Today on 2 November 2026. The report cited two sources. Sebi and the finance ministry did not respond to Reuters’ email queries, according to Mint.
The regulator has also reportedly proposed relief for domestic mutual fund investors. Under the idea, moving money from one mutual fund scheme to another would not be treated as a taxable sale if the units were held for more than a year.
The recommendations are not binding. The final decision rests with the government, and they come months before the Union Budget in February, the reports said.
What it means for you
Nothing changes today. These are proposals, and the tax rules stay as they are until the government announces otherwise.
As things stand, a gain on listed securities sold after more than a year is taxed at 12.5%, while a gain on those sold sooner is taxed at 20%, according to the reports. Securities transaction tax on trades and withholding tax on dividends are charged on top.
If you invest in mutual funds, the switch proposal is the relevant part. Today, moving from one scheme to another is a sale of units, so any gain can attract tax even though you reinvest the money. Under the reported idea, a switch after more than a year would not be taxed at that point. Whether and how this would work in law is not known.
On the foreign side, brokerage IIFL estimates that dropping the tax altogether would add about 2.3 percentage points to what foreign investors earn, according to Mint. Jefferies said any cut in capital gains taxes could make India more attractive and support portfolio inflows.
Raamdeo Agrawal of Motilal Oswal Financial Services told Business Today the move would likely be seen as largely positive if it happens, but that the final announcement, possibly in the Budget, must be awaited.
You can use our SIP Calculator to see how a regular investment grows, and read our guide to capital gains for the basics.
Background
Over the past two years, Indian shares have done worse than those of other emerging markets, the reports said. The Nifty 50 has fallen 4.8% in that period, while the MSCI emerging market index is up 40%, according to Mint.
Foreign investors have sold a record $31 billion of Indian stocks this year, which has put pressure on the rupee. Sebi’s recommendations follow many meetings with foreign investors over two years, in which a consistent message was that India’s taxation of them needs to change, according to the sources quoted by Mint.
Returns from domestic equity mutual funds have also stagnated. Morningstar data cited by Mint shows average returns from large-cap funds are down 1.6% over the period. Indian mutual funds hold ₹82.6 trillion in assets, with an average of ₹30 billion a month coming in through monthly investment plans, Mint reported.
What to watch next
The next marker is the Union Budget in February, where the government could accept, modify or ignore the proposals. Business Today also linked to a report that the finance ministry is weighing options on LTCG tax, with a decision likely in the Budget for 2027-28.
