Has Capital Gains Tax Amendment (23-07-2024) Reduced FII Interest in Indian Equity Markets

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....as Capital Gains Tax Amendment (23-07-2024) Reduced FII Interest in Indian Equity Markets<br> Query (Issue) Started By: - Fahiyaz Ahmmed Dated:- 3-1-2026 Last Reply Date:- 3-1-2026 Income Tax<br>Got 3 Replies<br>Income Tax<br>Has Capital Gains Tax Amendment (23-07-2024) Reduced FII Interest in Indian Equity Markets? - Discussion Post the Finance Act amendment dated 23-07-2024, Long-Term Capital G....

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....ains on listed equity are taxable at 12.5% u/s 112A on gains exceeding Rs. 1,25,000, whereas earlier the rate was 10% on gains exceeding Rs. 1,00,000. At the same time: * The Indian Rupee has weakened against the US Dollar, reducing dollar-denominated returns for Foreign Institutional Investors (FIIs). * Competing markets such as China and Taiwan reportedly do not levy capital gains tax o....

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....n equity investments for foreign investors. * Recent data indicates net FII outflows from Indian equity markets. Points for discussion: * To what extent has the increase in LTCG tax rate and reduction of exemption threshold contributed to declining FII interest in Indian equities? * How significant is currency depreciation risk compared to capital gains taxation in influencing FII inv....

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....estment decisions? * Is India becoming less tax-competitive compared to markets like China and Taiwan from an FII perspective? * Should India consider tax policy reforms (e.g., lower LTCG rates for FIIs, higher exemption limits, or currency-adjusted taxation) to attract and retain long-term foreign portfolio investment? What tax or policy changes should India consider to improve FII parti....

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....cipation while balancing revenue considerations? Reply By Fahiyaz Ahmmed: The Reply: NOTE-&nbsp; Quick Comparison (in context of India's 12.5% LTCG) Country Capital Gains Tax on Listed Equity (Foreign Investors) India 12.5% on long-term capital gains over ?1,25,000 (post 23-07-2024 amendment) China Generally no specific CGT on A-share gains (but ancillary taxes/conditions apply) Glo....

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....bal Practice Guides Taiwan No separate CGT on listed share gains (abolished since 2016) &nbsp; &nbsp; Reply By Fahiyaz Ahmmed: The Reply: Comparison (approx): Year FII Equity Net Outflow (? Crore) 2024 ~?1.21 lakh crore (net sell) PL Capital 2025 ~?1.58 lakh crore (net sell) The Economic Times 2025 FII share sales total ~?2.32 lakh crore Reply By Fahiyaz Ahmmed: The Reply: ....

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....Tax on FIIs under Section 111A - Pre vs Post Amendment * Pre-amendment (up to 22-07-2024): STCG u/s 111A on equity shares was taxable at 15% for FIIs. * Post-amendment (w.e.f. 23-07-2024): STCG u/s 111A is taxable at 20% for FIIs.<br> Discussion Forum - Knowledge Sharing ....