FPIs Must Adapt: SEBI Chief Rules Out Changes In Taxation

The recent government clarification on FPIs being subjected to a long-term capital gains tax of 12.5 per cent from April 1, up from the earlier rate of 10 per cent, raised apprehensions.

Pandey, however, maintained that the tax system has responded effectively to investor concerns and facilitated necessary adjustments in the latest Budget.

Source : PTI

Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey emphasised on Saturday that foreign portfolio investors (FPIs) must adapt to the existing taxation framework rather than expecting changes.

Having taken charge as Sebi's chief three weeks ago, Pandey pointed out that India's financial ecosystem already offers several advantages, such as stable policies, controlled inflation, and strong returns, reported PTI.

No Change Expected in Taxation

Addressing concerns regarding taxation, Pandey reiterated that there was no need to disturb the current system. “If some certainties have already come in terms of taxation, let us not unsettle it,” he stated at the Business Today Mindrush 2025 event.

He highlighted India's strong performance, citing over 11 per cent annual returns on the MSCI over the past five years, along with rising consumption and increasing capital formation from both public and private sectors.

The recent government clarification on FPIs being subjected to a long-term capital gains tax of 12.5 per cent from April 1, up from the earlier rate of 10 per cent, raised apprehensions. This taxation change, coupled with global events, has contributed to FPI outflows in 2024.

Pandey, however, maintained that the tax system has responded effectively to investor concerns and facilitated necessary adjustments in the latest Budget.

Action Against False Corporate Disclosures

Pandey also addressed corporate malpractices, expressing concern over misleading financial disclosures by some companies. “There are corporate disclosures (where) there are malpractices... there are blatantly false disclosures being made. We will not hesitate in taking actions against such disclosures,” he asserted.

Sebi’s surveillance mechanisms are actively identifying entities engaged in such activities, and the regulator's head assured that appropriate regulatory actions will be taken.

Speaking about derivatives trading, Pandey suggested that a more nuanced approach was needed to analyse market volumes. He noted that notional interest figures could sometimes be misleading and emphasised the importance of refining measurement metrics. He also highlighted the necessity of a balanced financial system, ensuring that market profits are not limited to large institutional investors while retail participants face losses. Sebi plans to introduce new regulations to address these concerns.