Rashesh Shah, CEO of Edelweiss, has called on the Indian government to remove the capital gains tax for foreign investors. He believes this move could help revive the struggling stock market. Shah pointed out that foreign investors have pulled out over $28 billion from Indian equities this year. This withdrawal has significantly affected market sentiment. Currently, a 12.5% tax applies to long-term capital gains on equities held for over a year. Short-term gains are taxed at 20%.
Government's Tax Relief Considerations
The Indian government is reportedly looking at a tax relief package for the stock market. However, an announcement before the upcoming budget is unlikely. Among the proposals are different tax rates for promoters, retail investors, and foreign investors. There may also be changes to the Securities Transaction Tax (STT). Additionally, there is talk of extending the holding period for long-term capital gains to three years, according to a report by Moneycontrol.
Market Reactions to Foreign Outflows
The large outflows from foreign investors have raised concerns among market participants. Shah stressed that removing the capital gains tax could attract more foreign capital. This influx is crucial for the market's recovery. He said, "If we want to attract foreign investment, we need to make our policies more favorable."
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Ongoing foreign selling pressure is likely to weigh on Indian equities. This is particularly true for indices like the Nifty and Sensex. If the government introduces tax relief measures, it could boost investor sentiment and stabilize the market.
Keep an eye out for further developments on the government's tax relief proposals ahead of the budget announcement.
Based on reporting by: moneycontrol.com