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Business & Stocks Livemint Markets & Economy • Oct 14, 2026

LTCG STT Tax Rate Review: SBI Research Urges FM Sitharaman to Abolish Capital Gains Tax to Curb FII Sell-Offs

💡 Key Takeaways

•SBI Research urged FM Nirmala Sitharaman to abolish Long-Term Capital Gains (LTCG) tax on equities.
•Proposed extending equity holding periods to 2-3 years to anchor hot money flows.
•Targeted at mitigating sustained foreign institutional investor (FII) equity sell-offs in Indian markets.

NEW DELHI [NCRBuzz Wire] — **SBI Research has called upon Union Finance Minister Nirmala Sitharaman to overhaul the existing capital gains taxation framework to counter aggressive foreign institutional investor (FII) equity liquidations.** The premier economic research desk emphasized that modifying holding periods to 2-3 years alongside completely abolishing Long-Term Capital Gains (LTCG) tax on equities is imperative for anchoring volatile hot money inflows.

### Fiscal Dynamics & FII Liquidation Pressures

**Foreign capital outflows have intensified across Indian benchmark indices due to stringent short-term tax friction and global macroeconomic tightening by central banks.** Financial analysts note that the current Securities Transaction Tax (STT) structure, combined with existing LTCG tax rates, compresses net alpha yields for institutional asset managers, triggering portfolio reallocations toward alternative emerging markets.

| Metric / Aspect | Details |

|---|---|

| Primary Proponent | SBI Research |

| Key Recommendation | Abolish LTCG Tax & Extend Holding Period to 2-3 Years |

| Core Target | Anchor Hot Money Flows & Mitigate FII Sell-Offs |

| Regulatory Authority | Ministry of Finance (MoF) |>

### Policy Objectives & Market Implications

**The proposed fiscal recalibration aims to incentivize long-term domestic and foreign capital accumulation while reducing speculative market volatility.** Market stakeholders argue that structural adjustments to the tax regime will bolster secondary market liquidity, improve risk-reward ratios for institutional investors, and provide a stable valuation cushion for upcoming primary equity offerings.

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🏛️ Background Context

The Indian equity market has witnessed bouts of capital flight driven by global monetary policy shifts and domestic tax burdens, including the reintroduction of LTCG tax in the 2018 Union Budget and frequent adjustments to the Securities Transaction Tax (STT). Policymakers continuously balance revenue generation needs with the imperative of maintaining competitive capital markets for foreign portfolio investors (FPIs).

💡 Citizen & Commuter Quick Explainer (FAQ)

Q1: What specific tax changes are being recommended by SBI Research?

SBI Research has recommended abolishing the Long-Term Capital Gains (LTCG) tax on equities and extending the minimum holding period to 2-3 years to stabilize hot money flows.

Q2: Why are these tax modifications being proposed for the stock market?

The proposals are designed to curb aggressive FII sell-offs and capital outflows driven by short-term tax friction and global macroeconomic tightening.

Q3: Which authority holds the jurisdiction to implement these tax reforms?

The Ministry of Finance, headed by Union Finance Minister Nirmala Sitharaman, holds the jurisdiction to review and implement changes to capital gains taxes and STT.

Verified Wires: Livemint Markets & Economy, SBI Research Economic Briefings Original Wire Dispatch ↗

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