Samir Arora, founder and CIO of Helios Capital, has strongly criticised the Indian government’s decision to raise capital gains tax, particularly for foreign institutional investors (FIIs), calling it a “huge mistake.” Speaking at the Business Standard Manthan Summit 2025, Arora argued that this policy is damaging investor confidence and contributing to massive sell-offs in Indian equity markets.
I have been writing this for long. Remove capital gains taxes. We need FII as we are in early stage of capital markets growth. The benefits weigh far more than the loss of tax collected. Ego should be the last thing that government should be bothered. Retail investors need your… pic.twitter.com/uL1gG3Sa9g
— Renuka Jain (@RenukaJain6) March 1, 2025 FIIs pulling out amid tax hikes
“The biggest mistake they’ve made, and the one they need to accept, is the imposition of capital gains tax, especially on foreign investors. It is completely wrong,” Arora stated. He pointed out that FIIs have been selling Indian equities for five consecutive months, with outflows reaching Rs 1 trillion in just the past two months.
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Arora emphasized that taxing key investors such as foreign sovereign funds, pension funds, universities, and high-net-worth individuals (HNIs)—who already face currency risks and lack tax set-offs in their home countries—was a critical misstep.
Impact of Union Budget on markets
The Union Budget 2024-25, presented by Finance Minister Nirmala Sitharaman, increased the long-term capital gains (LTCG) tax from 10% to 12.5% and raised the short-term capital gains (STCG) tax on certain financial securities from 15% to 20%.
These tax hikes triggered an immediate market reaction, with the Sensex plunging 1,414 points (1.9%) and the Nifty dropping 420 points (1.86%) on Friday. The market capitalisation of BSE-listed companies shrank by Rs 9 lakh crore.
With over 30 years of market experience, Arora noted that India collected around $10-11 billion in capital gains tax in FY23. However, he argued that the long-term damage to foreign investment would far exceed these tax revenues.
“India should consider waiving the capital gains tax to show respect for markets and foreign investors,” he concluded.
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