Foreign investors push for India tax relief on securities

Foreign portfolio investors and trading companies have approached India's financial regulators and the central government seeking relief from securities transaction taxes, according to reports. The appeals reflect concerns over the burden of double capital gains taxation affecting international investors. Stakeholders have indicated that the Reserve Bank of India's stringent leverage rules pose a risk of redirecting trading activities to offshore markets, which could reduce government revenues and diminish domestic market liquidity. The requests for tax concessions follow the government's recent decision to implement tax cuts on government securities, signaling potential openness to reviewing the tax treatment of investment instruments.

This matter carries significance for India's capital markets competitiveness and foreign investor participation. When onshore regulatory or tax burdens increase substantially relative to offshore alternatives, capital and trading volumes can migrate to competing financial centers, reducing domestic market depth and government tax receipts. The double taxation issue—where investors face levies both domestically and in their home jurisdictions—is a structural concern that affects portfolio allocation decisions. For traders and financial institutions, such friction costs influence position sizing and market engagement. The outcome of these discussions between market participants and authorities could affect foreign inflow patterns, market microstructure, and India's standing as an attractive financial hub relative to regional and global competitors.

Source: Markets-Economic Times