FPIs to Exit India if Capital Gains Tax Rises, Warns Samir Arora

• Helios Capital's Samir Arora warns that increasing capital gains tax in the upcoming Budget will drive foreign portfolio investors (FPIs) out of Indian equities.
• Arora argues that higher taxes, combined with currency depreciation, make India uncompetitive compared to global markets, especially the US where FPIs pay little to no capital gains tax.
• He counters the equity-debt parity debate, explaining that equity returns are taxed multiple times (corporate profits, dividends, capital gains) unlike debt, where the borrower gets a tax benefit.
• Increased equity taxation risks disrupting India's capital formation cycle by hindering private equity exits and the recycling of capital into new ventures.
• Arora notes that markets have already corrected, but policy shocks like signaling future capital gains hikes would be interpreted negatively, damaging investor confidence.

Why It Matters: Raising capital gains tax will deter FPIs, harm India's competitiveness, and disrupt capital formation.