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Business & Stocks Economic Times Markets • Nov 02, 2026

SEBI Proposes Scrapping Long-Term Capital Gains Tax for Foreign Investors Ahead of Union Budget

💡 Key Takeaways

•SEBI has proposed removing long-term capital gains tax for foreign investors to boost market competitiveness.
•Mutual fund investors may receive LTCG exemptions when reinvesting proceeds from existing holdings into new ones.
•The recommendations are non-binding and require formal statutory amendments by the Union Government during budget formulations.

NEW DELHI [NCRBuzz Wire] — ### Regulatory Proposal Overview

**NEW DELHI [NCRBuzz Wire] — India's capital markets regulator has formally proposed the removal of long-term capital gains tax for foreign investors to enhance market competitiveness.** According to reports from financial newsrooms, the Securities and Exchange Board of India (SEBI) has also recommended specific tax relief measures for domestic mutual fund investors, suggesting exemptions from LTCG when selling existing holdings to reinvest in new ones. These recommendations arrive months ahead of the annual federal budget scheduled for February, and market sources clarify that the proposals are non-binding with final authority resting with the Union Government.

### Fiscal Rationale & Market Impact

**The primary driver behind this regulatory initiative is the mitigation of high transaction costs and elevated capital gains tax burdens faced by foreign institutional entities.** By streamlining tax frameworks, the proposed adjustments aim to stimulate robust liquidity injections, lower friction costs, and attract higher foreign portfolio investments into domestic equity markets.

### Financial Metrics Overview

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### Legislative Next Steps

**Market participants are actively monitoring the Ministry of Finance's upcoming policy evaluations.** While SEBI holds advisory jurisdiction over market structures, final implementation requires formal statutory amendments by the Union Government during legislative budget formulations.

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🏛️ Background Context

India's capital gains tax framework has been a subject of continuous federal budget debates concerning international competitiveness, institutional capital retention, and market liquidity across emerging Asian bourses.

💡 Citizen & Commuter Quick Explainer (FAQ)

Q1: What triggered this regulatory proposal by SEBI?

The proposal was initiated by SEBI to address high transaction costs and elevated capital gains tax burdens faced by foreign institutional entities, thereby boosting market competitiveness.

Q2: Are these recommendations legally binding on the government?

No, SEBI's recommendations are currently non-binding advisory proposals, and a final decision regarding implementation rests with the Union Ministry of Finance during budget formulations.

Q3: Who is directly affected by the proposed changes?

Foreign institutional investors stand to benefit from a potential complete exemption from long-term capital gains tax, while domestic mutual fund investors may receive tax exemptions when reinvesting proceeds into new holdings.

Verified Wires: Economic Times Markets, Livemint Markets & Economy, Business Standard, Google News Business Original Wire Dispatch ↗

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