Will cutting LTCG levy on equities bring foreign investors back?

In today’s Finshots, we explain why foreign investors are pulling money out of India and whether cutting taxes on their profits can help bring them back.

Love our insights? Add Finshots as a Preferred Source on Google ⭐ The StoryThe hot discussion in the market right now is that taxes on equities are too high, and that is why foreign investors are pulling money out of India.To put that in perspective, foreign investors have pulled out over ₹3 lakh crore from the Indian equity market so far in 2026, of which about ₹44,100 crore went out in October alone. This has worried many analysts and market experts because India needs foreign money to fund its current account deficit (CAD). In simple terms, that means paying for imports, which often exceed exports.

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So, some believe that cutting or even scrapping the long-term capital gains (LTCG) tax on equities could help bring some of that money back.But is that really the case?Well, let’s take it from the top and start with how LTCG tax on equities has evolved over the years. For the uninitiated, LTCG is the profit you make when you sell listed shares or equity mutual funds after holding them for more than a year. Until 2004, these gains were taxed at 20%, but investors could use the benefit of something called indexation.