Business News | ASSOCHAM Calls for Tax Simplification, Long-term Holding Incentives to Strengthen Capital Flows

New Delhi [India], October 19 (ANI): Industry body ASSOCHAM has called for further tax rationalisation and simpler tax rules to attract stable, long-term foreign investment, while welcoming recent measures by the Reserve Bank of India (RBI) and the Finance Ministry to strengthen investor confidence amid volatility in the rupee and foreign portfolio investment (FPI) flows.

ASSOCHAM President Nirmal K Minda said the coordinated measures taken by the central bank and the government would help maintain macroeconomic stability and improve investor confidence amid global uncertainty.

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The industry body said the government and the RBI were moving in the right direction by addressing currency volatility and making India's investment environment more predictable. It also welcomed the Income-tax Amendment Ordinance, 2026, which exempts FPI investments in government securities from tax on interest and capital gains with effect from April 1, 2026.

“This forward-looking move will attract stable, long-term capital from pension funds, sovereign wealth funds and insurance companies,” ASSOCHAM Secretary General Saurabh Sanyal said.

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ASSOCHAM also welcomed Finance Minister Nirmala Sitharaman's remarks at the Bloomberg New Economy Forum on October 13 that the government was keen to hear investor views on long-term capital gains (LTCG) tax and securities transaction tax (STT) as part of consultations for the Union Budget 2027-28.

ASSOCHAM further said the consultative approach could reassure global investors and help make India's tax regime more competitive.

The industry body cited recent RBI measures, including a special dollar window for public sector oil marketing companies, the Foreign Exchange Risk Reserve, tighter foreign exchange derivative norms, open market operations and a higher cash reserve ratio requirement. It said these measures had helped the rupee recover nearly 2 per cent from its recent lows.

ASSOCHAM also pointed to India's foreign exchange reserves and the RBI's 7.1 per cent GDP growth projection for FY27 as indicators of economic strength.

ASSOCHAM Chief Economist S P Sharma called for further tax rationalisation and standardised interpretation of tax provisions. He also suggested considering a proposal by SBI Research to extend the definition of long-term equity holdings to two-three years and provide incentives for such investments.

The industry body said global factors, including high US bond yields, elevated crude oil prices and a shift of capital towards artificial intelligence and technology themes, had contributed to volatility in FPI flows.

ASSOCHAM said it would work with the government, RBI and Securities and Exchange Board of India to strengthen India's position as a destination for long-term global capital. (ANI)

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