By Sri Varshith Kumar Reddy E

India’s stock market increasingly resembles a shop offering discounts on merchandise that customers have little reason to buy. 

The Nifty 50 has fallen about 13 per cent this year, while the rupee has lost roughly 5.6 per cent of its value. 

For a dollar-based investor, the combined loss is considerably larger. 

Foreign portfolio investors have withdrawn approximately ₹3.1 lakh crore from Indian equities, almost twice the ₹1.7 lakh crore they pulled out during the whole of 2025.

The government has begun consultations on long-term capital gains tax and securities transaction tax. 

With the Union Budget due on February 1, 2027, the Finance Ministry has an opportunity to address investor concerns before the next round of capital allocation begins.

Tax reform would help, but India’s problem runs deeper than the cost of investing in its stock market. 

The country is asking investors to pay more for access to a market that has yet to produce enough companies capable of competing with the world’s most exciting businesses.

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The tax burden is substantial. Long-term capital gains on listed shares attract 12.5 per cent above ₹1.25 lakh annually. Surcharge and cess push the effective burden close to 15 per cent. 

Until July 2024, the headline levy was 10 per cent. Securities transaction tax has also increased. 

Since April this year, the levy on futures has risen from 0.02 to 0.05 per cent, while options have gone from 0.10 to 0.15 per cent.

The comparison with other markets makes India’s position harder to defend. 

Investors in the United States, Britain, Singapore and Japan generally pay no capital gains tax on listed equities. Taiwan uses a 0.3 per cent transaction tax instead. India collects both capital gains tax and transaction tax, creating a cumulative burden........

© Kashmir Observer