SEBI Chief Tuhin Kanta Pandey Urges FPIs to Accept Current Tax Framework

Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey on Saturday said that there is no need to alter the current taxation system and that foreign portfolio investors (FPIs) must “live with” the existing framework.

Pandey, who assumed office as SEBI chief three weeks ago, highlighted India’s numerous advantages as the fastest-growing large economy, delivering superior returns, maintaining a stable policy environment, and keeping inflation in check.

“If some certainties have already come in terms of taxation, let us not unsettle it,” he stated, pointing to the country’s consistent returns of over 11% per annum on the MSCI over the last five years, stable inflation, and fiscal consolidation. He also noted that consumption is rising and capital formation is witnessing an upswing due to investments from both the government and private sector.

He further clarified that the tax system has been responsive to the concerns of investors and has even facilitated certain moves in the latest Budget.

FPI Concerns Over Capital Gains Tax 

There were concerns over potential FPI pullouts following a government clarification that FPIs would have to pay long-term capital gains tax at 12.5% from April 1, up from the earlier rate of 10%.

The FPI segment has already witnessed outflows in 2024, a trend attributed to global factors. Despite this, Pandey’s comments suggest that investors should not expect any immediate changes to the taxation structure.

Strict Action Against False Corporate Disclosures 

Pandey also took a firm stance against corporate malpractices, stating that some companies are making “blatantly false disclosures.” He asserted that SEBI will not hesitate to take action against such entities.

“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 stated.

He assured that SEBI’s surveillance system is actively identifying entities involved in wrongful disclosures and that necessary actions will be taken.

Regulatory Changes in Derivatives and Market Participation 

Addressing the issue of market dynamics, Pandey noted that the measurement of volumes in the derivatives segment needs a nuanced approach, as notional interest can sometimes be misleading.

He indicated that SEBI will be bringing in new regulations to refine the metrics of measurement, ensuring a more transparent and fair system.

“We also need to change from a system where only the large, organised investors are making money and the retailers are losing,” he remarked, emphasising the need for an inclusive market structure.

A Call for Stability and Transparency 

Pandey’s remarks underscore SEBI’s commitment to maintaining a stable tax regime, cracking down on corporate malpractices, and refining market regulations to ensure a balanced and fair trading environment.

The regulator remains firm in its stance that FPIs and other stakeholders must adapt to the existing framework rather than expecting policy changes to suit their preferences.

Conclusion 

SEBI Chairman Tuhin Kanta Pandey reaffirmed the regulator’s commitment to stability, transparency, and fairness in India’s capital markets. He emphasised that FPIs must accept the existing tax structure while warning against corporate malpractices, assuring strict action against false disclosures.

Additionally, SEBI plans to refine market regulations for a fairer system, ensuring that both institutional and retail investors benefit from a balanced and well-regulated financial ecosystem.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their research and assessments to form an independent opinion about investment decisions.