Will LTCG tax be abolished or reduced? Government preparing to offer a major boon to investors..

Persistent selling by foreign investors (FIIs) in the stock market has concerned the government; consequently, preparations are underway to offer relief to foreign investors on various fronts, including the Long-Term Capital Gains (LTCG) tax. Sources familiar with the matter told Bloomberg that the government is poised to announce measures—such as tax cuts and the removal of ownership limits on certain bonds—by the end of this week to attract foreign investment.

According to sources, the Cabinet may consider significant cuts to taxes paid by global funds on the country's bonds this Wednesday. However, no such announcement was made following the Cabinet meeting.

**What kind of tax cuts on bonds are possible?**
Speaking on condition of anonymity due to the confidential nature of the details, sources indicated that tax reductions are being planned. They also mentioned that the government would consider either abolishing the 20% tax on interest earned from bonds or reducing it to a minimal level.

Additionally, the Reserve Bank of India (RBI) may designate certain long-term government notes as "fully accessible," allowing foreign investors to purchase them without any limits. The last revision to this list of government securities occurred in 2024, when the central bank removed 14-year and 30-year bonds from the list.

However, neither the Ministry of Finance nor the Reserve Bank of India has responded to the matter so far. Bloomberg News had previously reported last month that India was considering tax cuts following a recommendation from the RBI.

It is worth noting that foreign investors have been consistently selling in Indian markets over the past few months. On May 29, foreign institutional investors (FIIs) recorded a record net sell-off of over ₹21,100 crore in the Indian stock market—the highest single-day outflow in at least two years.

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