‘India needs patient capital, scrap LTCG’: Vijay Kedia’s three suggestions to FM Sitharaman

Ace investor Vijay Kedia on Wednesday urged the Centre to abolish long-term capital gains (LTCG) tax on listed equities, arguing that long-term investors should not be treated as speculators. He said India needs more “patient risk capital” to build globally competitive businesses.

In a message addressed to Finance Minister Nirmala Sitharaman and the Finance Ministry, Kedia said removing LTCG tax would strengthen India’s capital markets and improve long-term investment sentiment.

“Long-term capital gains tax on listed equities should be abolished,” Kedia wrote on X.”A long-term shareholder is not a speculator but a provider of patient risk capital. By investing in and holding businesses, investors help companies expand, create jobs, innovate and contribute to India’s economic growth.”

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Kedia said India required large pools of long-term capital to create “world-class enterprises, infrastructure and global champions” and argued that tax policy should encourage households to move savings away from passive assets such as gold and into productive businesses.

“Tax policy should encourage households to move savings from passive assets, including imported stores of value such as gold, into productive businesses that create jobs, generate tax revenues and build national wealth,” he said.

The veteran investor also argued that governments already collect substantial revenues during a company’s growth cycle through multiple taxes, making LTCG taxation on shareholders an additional burden.

“The appreciation in a company’s value is not created in isolation. During its growth journey, the government already collects corporate tax, GST, income tax from employees, customs duties, stamp duties and numerous other levies,” Kedia said.

“Long-term capital gains are often the final outcome of economic activity that has already generated substantial tax revenues,” he added.

Kedia said tax policy must clearly distinguish between long-term investing and speculative trading. “A long-term shareholder is a partner in wealth creation, not merely a participant in market transactions. Tax policy should reward long-term ownership of productive businesses and distinguish it from short-term speculation.”

The remarks come at a time when foreign institutional investors (FIIs) have continued pulling money out of Indian equities, and concerns over market sentiment have intensified.

In the Union Budget presented in July 2024, Sitharaman raised the LTCG tax rate on most assets to 12.5% from 10%, while increasing the exemption limit for listed equity and equity-linked instruments to ₹1.25 lakh.

Earlier, Samir Arora, founder and chief investment officer of Helios Capital, had also criticised capital gains taxation on investors, especially foreign investors, calling it the “biggest mistake”.

Speaking at the Business Standard Manthan Summit 2025, Arora said FIIs had sold Indian equities for five straight months, with outflows crossing ₹1 trillion in the last two months alone.

“The biggest mistake they (the government) have made, the biggest souring of sentiment, and reality which they have to accept is capital gains tax in India, particularly the foreign investors, is 100 per cent wrong,” Arora said.

He argued that foreign sovereign funds, pension funds and global investors faced currency risks and often did not get tax set-offs in their home countries, making Indian capital gains taxation particularly burdensome.