Archive · 12 Jan 2026
Budget 2026: Tax Measures to Stem FPI Outflows
The Indian government is thinking about making some changes to taxes in the upcoming Budget 2026-27 to encourage foreign investors to put more money into Indian stocks.
Right now, foreign investors have been taking out a lot of money from Indian stocks, which is not good for the economy.
The government is considering giving some tax breaks to long-term investors like pension funds and making it easier for foreign investors to put money into Indian markets.
They are also thinking about changing the taxes on profits from selling stocks, but they are worried that this might reduce the government's income.
For regular people, the new tax system introduced in the last budget has already made things better by reducing the amount of tax they have to pay.
As the new budget approaches, people are hoping for more simplicity and easier rules, even if big tax cuts are not likely.
The government may introduce tax concessions and ease macro prudential norms in Budget 2026-27 to boost foreign portfolio inflows.
FPIs pulled out $19 billion from Indian equities in 2025, with domestic savings at a multi-decade low of 30% of GDP.
Proposals include tax-free status for listed equity investments by long-term institutional investors and tweaking LTCG and STCG rates.
The new tax regime introduced in Budget 2025 has already provided significant tax savings for salaried individuals, especially those earning around Rs 20 lakh annually.
Tax experts advise against raising surcharges or reintroducing wealth tax for high-income individuals in Budget 2026-27, warning of potential capital flight and reduced investment.
- Who
- Indian government, tax experts, foreign portfolio investors (FPIs)
- What
- Potential tax measures in Budget 2026-27 to stem FPI outflows and boost foreign investment
- When
- Approaching Budget 2026-27
- Where
- India
- Why
- To stabilize markets, boost foreign investment, and address FPI outflows
- FPI Outflows in 2025
- $19 billion
- Domestic Savings Rate
- 30% of GDP (multi-decade low)
- Current LTCG Tax Rate for FPIs
- 12.5%
- Current STCG Tax Rate for FPIs
- 20%
- Tax Exemption for Pension Funds
- 100% under Section 10(23FE)
- FPI Investment Caps
- 6% for government securities, 2% for state securities, 15% for corporate bonds
- Tax Savings for Rs 20L Salaried
- ₹1,09,616 under new regime
- New Regime Tax-Free Income Limit
- ₹12 lakh
Sources
Budget 2026 Tax Debate Heats Up, Experts Warn Against Higher Surcharge & Wealth Tax
Steps to stem FPI outflows likely in Budget
Budget 2026 tax calculator: How much a Rs 20 lakh salaried taxpayer saves under new regime
