Money
Capital Gains Tax Under Review: Why Foreign Investors Pulled ₹1.8 Trillion Out of India
Foreign investors pulled a record ₹1.8 trillion out of Indian markets in a single year — and the Indian government is now open to cutting the tax on investment profits to win them back.
₹1.8 trillionRecord FPI net outflow from Indian markets in FY26 — the highest in 34 years
The facts
- 1Foreign Portfolio Investors (FPIs) — funds and institutions from abroad that buy Indian stocks and bonds — sold off a net ₹1.8 trillion worth of Indian securities in FY26, the highest outflow in 34 years.
- 2Capital gains tax is the extra tax you pay when you sell an investment at a profit; India raised these rates in 2024, which many FPIs said made the market less attractive compared to rival countries.
- 3The ₹1.8 trillion FY26 outflow was up from ₹1.3 trillion the previous year, with the sharpest selling happening in March 2026, suggesting the pressure intensified over time.
- 4Finance Minister Nirmala Sitharaman told lawmakers the government is open to hearing views on whether cutting capital gains tax could encourage investors to stay and bring fresh money in.
- 5A key tradeoff exists: lower capital gains tax could attract more investment and boost growth, but it also means less tax revenue for the government to spend on schools, hospitals, and infrastructure.
Why it matters
When large foreign funds exit Indian markets, share prices can fall and the rupee can weaken — raising costs for ordinary families on imported goods. The government's willingness to review tax policy shows how global investor decisions directly shape choices made in New Delhi, affecting everyone from kirana shop owners to students planning futures.
Sources
- Mint (Live Mint)
- Indian Parliament / Finance Ministry statement by Nirmala Sitharaman
- Securities and Exchange Board of India (SEBI)
