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SBI Research has recommended abolishing long-term capital-gains (LTCG) tax on equities while extending the holding period to two or three years, aiming to anchor longer-term foreign investment. This is a policy recommendation, not a tax change: in July 2026, the government told the Lok Sabha that no proposal to scrap equity LTCG 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 equity investments and extend the holding period to two or three years. The stated aim was to discourage volatile “hot money” flows and encourage foreign investors to commit capital for longer.
The Economic Times attributed this wording to SBI Research’s 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.” The report was penned by Soumya Kanti Ghosh, whom Business Today identifies as SBI’s Group Chief Economic Adviser; the quoted sentence is attributed to the report, not specifically to Ghosh.
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Why the recommendation focuses on foreign flows
SBI Research’s proposal responds to reported selling by foreign portfolio investors (FPIs), investors that hold financial assets such as shares without directly managing the companies. Business Today attributed to SBI Research a cumulative ₹3.51 lakh crore in FPI equity outflows from 2021 through September 2026. That is the report’s figure as relayed by the publication, not an independently verified flow calculation here.
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The report argued that policy steps to strengthen capital inflows were needed because monetary and foreign-exchange measures by the Reserve Bank of India alone might not be enough to address broader pressures. The tax proposal is therefore part of a broader policy argument. The available coverage does not establish that abolishing the tax would cause foreign inflows to rise.
How the proposal differs from the stated policy position
| Issue | SBI Research recommendation | Government position reported in July 2026 |
|---|---|---|
| Equity LTCG tax | Abolish the tax on equity investments. | No proposal to abolish it was under consideration, according to a Lok Sabha response. |
| Rate and investor groups | The report’s proposed abolition would change the tax treatment it discussed. | The response said the 12.5% rate applied equally to domestic retail investors and FPIs. |
| Holding period | Extend it to two or three years. | The cited parliamentary response establishes the tax-rate position, but the reviewed coverage does not provide enough legal detail to set out all holding-period eligibility thresholds or tax calculations. |
| Status | A recommendation in an SBI Research report dated October 12, 2026. | The July response said no abolition proposal was under consideration; the reviewed material does not show that the recommendation was adopted. |
The distinction matters for investors: a research recommendation does not change what tax applies. The July parliamentary response describes the position at that time, while the October report advocates a different policy. Neither source establishes a later enactment.
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Other measures SBI Research proposed
The report also called for steps aimed at foreign-currency inflows and investor confidence:
Do these 3 things before closing this tab:
1Fix the driver behind crashes, sound loss and screen glitches2Clear out junk files and repair common Windows errors3Scan for outdated or missing drivers - takes under a minute- Exporters should bring foreign-currency earnings back to India within a reasonable period of around six months, with extensions considered case by case.
- There should be greater clarity on withholding-tax treatment for external commercial borrowings (ECBs), particularly on applying benefits under double-taxation avoidance agreements.
These are additional recommendations in the report, not measures shown in the reviewed coverage as adopted government policy.
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What investors can conclude
The report puts tax treatment, holding periods and other capital-flow rules into the debate over attracting foreign investment. But it does not establish that the proposed changes will reverse outflows, and the government’s July statement was that no abolition proposal was under consideration. Investors should distinguish that policy advocacy from an enacted tax rule.
Sources: The Economic Times; Business Today; Business Standard.
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