- The Indian government is not considering any cuts to capital gains tax for foreign portfolio investors.
- Short-term capital gains remain at 20% while long-term gains are taxed at 12.5% under the current law.
- Foreign investors must provide a Tax Residency Certificate and Form 10F to access applicable treaty benefits.
(INDIA) — India is not considering a cut in capital gains tax for foreign portfolio investors, leaving the existing tax structure in place for overseas investors in Indian markets.
The policy direction remains aligned with the current framework rather than a fresh concession. That position comes as investors continue to assess how the Finance Act, 2024 reshaped the taxation of listed securities.
Under the post-23 July 2024 regime, short-term capital gains on listed securities subject to securities transaction tax, or STT, are taxed at 20%. Long-term capital gains on listed securities are taxed at 12.5%, with an exemption threshold of INR 125,000.
Those changes apply to transfers made on or after 23 July 2024. The Finance Act, 2024 rationalized the capital gains regime, and officials have given no indication that a separate reduction is being prepared for FPIs.
Indian law anchors that treatment in Section 115AD of the Income-tax Act, 1961, which governs the taxation of foreign portfolio investors. The broader framework also reflects the Securities and Exchange Board of India’s FPI regulations.
Treaty relief remains available where applicable, but investors must meet document requirements tied to that claim. The framework requires a Tax Residency Certificate (TRC) and Form 10F.
India’s tax treatment for these investors also draws a clear line between investment gains and business activity. Capital gains from securities are treated as capital gains, not business income.
Dividend income follows a separate rule. It is generally taxed at 20% plus surcharge and cess, unless an applicable tax treaty reduces that burden.
FPIs also do not receive indexation benefits on capital gains. That keeps the structure distinct from some other forms of capital gains taxation where inflation adjustment alters the taxable amount.
The current framework also sits on top of an earlier change in the treatment of listed securities. Gains from listed securities were grandfathered for amounts accrued up to 31 January 2018 after the long-term capital gains exemption was withdrawn from 1 April 2018.
That history matters because it shows the government has already laid out a specific path for taxing portfolio investment in listed securities, and the latest position keeps that path intact. Investors looking for a lower levy on capital gains tax for FPIs are not getting a new policy signal from New Delhi.
Portfolio investors therefore have to plan under the rates and conditions already in force. In practice, that means working within the post-23 July 2024 framework, checking whether treaty relief applies, and ensuring that TRC and Form 10F filings support any reduced claim.
Market participants will also watch for any further official statement or clarification, but the government’s current stance is plain: the Finance Act, 2024 framework stands, and the existing FPI tax structure remains India’s position on capital gains tax.
