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Clear out junk files and repair common Windows errorsFree Scan →Scan for outdated or missing drivers - takes under a minuteDriver Scan →SBI Research has recommended abolishing long-term capital-gains (LTCG) tax on equity investments and extending the holding period to two or three years, aiming to encourage steadier foreign investment. This is a policy recommendation, not an announced tax change: in July 2026, the government said no proposal to scrap the tax was under consideration.
What SBI Research proposed
In its October 12, 2026 Ecowrap report, SBI Research called for two linked changes: abolish LTCG tax on equities and extend the holding period to two or three years. The report’s stated objective was to anchor volatile “hot money” flows and encourage longer-term foreign investment. The Economic Times attributed this wording to the report: “The government must seriously look into anchoring hot money flows into equity segment by extending the holding period to say 2-3 years and abolishing the long-term capital gains tax for equity.”
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The report was penned by Soumya Kanti Ghosh, identified by Business Today as SBI’s Group Chief Economic Adviser. The quoted sentence is attributed to SBI Research, not to Ghosh personally.
Why the recommendation focuses on foreign portfolio flows
SBI Research argued that policy steps to strengthen capital inflows may be needed because monetary and foreign-exchange measures by the Reserve Bank of India alone might not address broader pressures. It presented the proposed tax and holding-period changes as a way to make equity investment more durable, rather than relying on short-term inflows.
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Business Today reported SBI Research’s estimate that foreign portfolio investors (FPIs) withdrew ₹3.51 lakh crore from the equity segment between 2021 and September 2026. That is a cumulative figure attributed to SBI Research, not an independently verified flow calculation here. It helps explain the report’s concern about outflows, but it does not establish that eliminating the tax would reverse them.
How the proposal differs from the stated policy position
The key distinction is between an analyst recommendation and government policy. A July 2026 parliamentary response said that no proposal to abolish equity LTCG tax was under consideration. It also stated that the 12.5% rate applied equally to domestic retail investors and FPIs. Business Standard reported the response.
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| Issue | SBI Research recommendation | Position described in the July 2026 response |
|---|---|---|
| Equity LTCG tax | Abolish it | 12.5% rate; stated to apply equally to domestic retail investors and FPIs |
| Holding period | Extend it to two or three years | The response, as reported, does not establish a proposed change to the holding period |
| Status | Recommendation in the October 12 Ecowrap report | No proposal to abolish the tax was under consideration in July 2026 |
The available reporting does not provide enough primary legal detail to explain every eligibility threshold or tax computation. The table therefore describes the recommendation and the government’s reported position, not a complete guide to Indian capital-gains tax rules.
Other measures in the report
SBI Research also recommended steps aimed at supporting foreign-currency inflows and investor confidence:
- Require exporters to bring foreign-currency earnings back to India within a reasonable period of around six months, with extensions considered case by case.
- Provide greater clarity on withholding-tax treatment for external commercial borrowings (ECBs), particularly how benefits under double-taxation avoidance agreements should apply.
These were additional policy proposals in the report, not measures shown as adopted.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What the recommendation does—and does not—establish
The report makes a policy case for pairing a longer holding period with tax abolition to encourage longer-term equity flows. It does not prove that the changes would increase foreign inflows, nor does the cited outflow figure demonstrate that tax treatment caused the withdrawals. The material available here establishes the recommendation and the government’s July position, but not a subsequent government decision adopting the proposal.
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