The government is open to stakeholder views on reducing capital gains tax on investments in stock markets, aiming to make domestic markets more attractive to foreign portfolio investors (FPIs), Finance Minister Nirmala Sitharaman said on Monday.
Foreign portfolio investors have been fleeing Indian markets, driven by higher capital gains taxes, a weaker rupee, and shifting global allocations.
“On this issue, and on every other issue, we are always ready to listen to people. We will take their inputs,” Sitharaman said in response to a question on whether the government is considering reducing such taxes. She was speaking on the sidelines of an awards function organised by the Cotton Textiles Export Promotion Council (TEXPROCIL) in Mumbai.
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The government imposes a short-term capital gains tax (STCG) of 20% on equity shares and equity mutual funds, and a 12.5% long-term capital gains (LTCG) tax on annual gains of over ₹125,000 on such investments sold after 12 months.
FPIs were net sellers of securities worth a record ₹1.8 lakh crore in FY26, the highest in 34 years and up from ₹1.3 lakh crore in FY25. The highest outflows were seen in March 2026 at around ₹1.18 lakh crore. According to the Reserve Bank of India (RBI) data, FPIs have registered net outflows of over $10 billion (approximately ₹95,200 crore) in FY27 so far, including sales of $8.3 billion in April 2026 and $1.8 billion as of 20 May.
On whether the government is considering measures such as issuing sovereign bonds to attract foreign capital amid a fast-depreciating rupee, Sitharaman said that the government is receiving and gathering a lot of inputs and suggestions, including on rupee, investments and gold or sovereign bonds. “People voluntarily send, some people are collecting from departments. We will look into every one of these submissions.”
At a separate event to mark the Small Industries Development Bank of India’s (SIDBI) 37th Foundation Day, the minister warned that the ongoing West Asia conflict could drive up fuel prices and hurt India’s exports in an uncertain global environment.
“The West Asia crisis not only is a diplomatic or a geopolitical issue, but for businesses and common people it can mean higher fuel cost, delayed cargo, costlier shipping, shortage of inputs, pressure on working capital and uncertainty in export orders,” Sitharaman said.
Even so, the government decided to cut the central excise duty on petrol and diesel by ₹10 per litre on 27 March to shield citizens and businesses from the steep rise in global crude prices. This is expected to cost the exchequer over ₹1 lakh crore in FY27.
