Bigger India
Foreign investors fret over India’s surprise capital gains tax
The tax, unveiled as part of the government’s annual budget presentation, is raising the spectre of reduced inflows into a country that has been a darling for foreign investors, who pumped in $2.2 billion so far this year after bringing in $75 billion over the previous six years.
Minutes after India’s surprise announcement of a 10 percent long-term capital gains tax on equities, Rakshit Sethi’s inbox began filling with emails from worried foreign investors. Sethi, managing director at investment firm Fair Value Capital, could offer few words of comfort.
“There is no way to sugar coat it,” he said. “This will have a direct impact.”
Even before a sharp sell-off in global markets at the start of this week, foreign investors had responded with dismay after Finance Minister Arun Jaitley said on Thursday that India would tax capital gains for equity investments held more than a year starting on April 1, re-imposing a tax scrapped in 2004.