Key Takeaways
- • Market veteran Ajay Bagga said on Wednesday India should benchmark its long-term capital gains (LTCG) and securities transaction tax (STT) against Hong Kong, Singapore and Dubai, aiming to be best in class, in remarks to NDTV Profit.
- • India taxes long-term gains on listed equity at 12.5% above an annual exemption of Rs 1.25 lakh, and levies STT on both buy and sell sides of delivery trades; Hong Kong has no capital gains tax on shares, Singapore taxes no share disposal gains, and the UAE does not tax individuals' share gains.
- • FII net selling has crossed Rs 3 lakh crore in 2026 so far, per NSDL data, and Bagga warned that if markets do not improve within six months, SIP flows could stop and investors could shift to other asset classes.
- • Gurmeet Chadha of Complete Circle Wealth Solutions said arbitrage players and hedge funds have lost interest because high STT has sharply raised their costs, and cited a Canadian pension fund that is taxed in India alone among roughly 100 countries where it invests.
- • Bagga said around 2,000 Indian family offices and about 1,500 Indian family foundations are based in Dubai, arguing that money is moving offshore because of the tax gap.
Summary
Market veteran Ajay Bagga said on Wednesday that India should benchmark its capital gains and transaction taxes against Hong Kong, Singapore and Dubai and aim to be the best in class. His remarks followed Finance Minister Nirmala Sitharaman's statement at the Bloomberg New Economy Forum in New Delhi, a day earlier, that the government would keenly hear views on long-term capital gains tax and securities transaction tax. Indian markets bounced and settled higher on Tuesday after her comments.
Speaking to NDTV Profit, Bagga said tax is a real concern, particularly for foreign investors, noting that the Nifty has returned about 5% over five years while the rupee has weakened sharply. Paying 12.5% tax after years of holding equities is a hard sell for foreign institutional investors, he said, adding that the market fears LTCG could eventually rise to 20%. He also argued that not all asset classes should be treated alike, stating that equities carry a high amount of risk.
Gurmeet Chadha, Managing Partner and CIO at Complete Circle Wealth Solutions LLP, said policymakers should focus on factors within their control. He said arbitrage players and hedge funds, which buy Nifty in the cash market and sell in futures, have lost interest because high STT has raised their costs sharply. He cited a recent meeting with the managing director of a Canadian pension fund, which has roughly $730 billion invested globally, including $26-27 billion in India, and which he said pays tax only in India among about 100 countries where it operates. Chadha pointed to a disconnect between markets and the real economy, noting strong GDP growth, earnings, industrial output and bank credit alongside continuing FII outflows.
The article compares India's regime with the three markets Bagga named. India taxes long-term gains on listed equity at 12.5% above an annual exemption of Rs 1.25 lakh, and STT applies to both buy and sell sides of delivery trades. Hong Kong levies no capital gains tax on shares but charges stamp duty of 0.2% in total, split equally between buyer and seller, a rate unchanged since November 2023. Singapore does not tax capital gains on share disposals and charges no stamp duty on SGX-listed shares settled electronically through the Central Depository. The UAE does not tax individuals' gains on personal share investments, while companies face a 9% corporate tax, with a participation exemption that can make many corporate share disposals tax-free.
Bagga said Indian money is already moving abroad, with around 2,000 family offices of Indians based in Dubai and about 1,500 Indian family foundations. He acknowledged tax is only one drag on the market, stating that a rethink on STT and LTCG would address one part of the problem and an end to FII outflows would help considerably. He warned that if markets do not show improvement in the next six months, systematic investment plans could be stopped and investors could move to other asset classes, saying all gains of the last five to six years could be undone.
Speaking to NDTV Profit, Bagga said tax is a real concern, particularly for foreign investors, noting that the Nifty has returned about 5% over five years while the rupee has weakened sharply. Paying 12.5% tax after years of holding equities is a hard sell for foreign institutional investors, he said, adding that the market fears LTCG could eventually rise to 20%. He also argued that not all asset classes should be treated alike, stating that equities carry a high amount of risk.
Gurmeet Chadha, Managing Partner and CIO at Complete Circle Wealth Solutions LLP, said policymakers should focus on factors within their control. He said arbitrage players and hedge funds, which buy Nifty in the cash market and sell in futures, have lost interest because high STT has raised their costs sharply. He cited a recent meeting with the managing director of a Canadian pension fund, which has roughly $730 billion invested globally, including $26-27 billion in India, and which he said pays tax only in India among about 100 countries where it operates. Chadha pointed to a disconnect between markets and the real economy, noting strong GDP growth, earnings, industrial output and bank credit alongside continuing FII outflows.
The article compares India's regime with the three markets Bagga named. India taxes long-term gains on listed equity at 12.5% above an annual exemption of Rs 1.25 lakh, and STT applies to both buy and sell sides of delivery trades. Hong Kong levies no capital gains tax on shares but charges stamp duty of 0.2% in total, split equally between buyer and seller, a rate unchanged since November 2023. Singapore does not tax capital gains on share disposals and charges no stamp duty on SGX-listed shares settled electronically through the Central Depository. The UAE does not tax individuals' gains on personal share investments, while companies face a 9% corporate tax, with a participation exemption that can make many corporate share disposals tax-free.
Bagga said Indian money is already moving abroad, with around 2,000 family offices of Indians based in Dubai and about 1,500 Indian family foundations. He acknowledged tax is only one drag on the market, stating that a rethink on STT and LTCG would address one part of the problem and an end to FII outflows would help considerably. He warned that if markets do not show improvement in the next six months, systematic investment plans could be stopped and investors could move to other asset classes, saying all gains of the last five to six years could be undone.
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