LTCG tax: Higher taxes spark panic among foreign portfolio investors

Most foreign funds are peeved over the reintroduction of the tax without the abolition of the securities transactional tax

The government’s decision to reintroduce the long-term capital gains (LTCG) tax has spooked foreign portfolio investors (FPIs), who rushed to the finance ministry on Friday to seek relief. Sources said FPIs were concerned about the escalation in the costs for investing in India vis-à-vis other Asian and emerging markets (EM). Overseas investors were also worried whether the ‘grandfathering’ relief would be extended to them.

While news about the LTCG tax has been doing the rounds for a while, FPIs were hopeful of status quo on the tax benefit on shares held for the longer term. At the most, foreign funds had