Nilesh Shah of Kotak Mahindra Asset Management Company, has called on the government to review the combined burden of Securities Transaction Tax (STT) and capital gains tax, arguing that investors are being taxed twice. His comments come amid a broader debate over whether India’s tax policy treats different asset classes fairly and encourages long-term investment.
“Undoubtedly, the dual taxation by way of STT as well as capital gain is something which has bothered investors both globally as well as locally,” Shah said, adding that he hopes the Finance Ministry will take appropriate action.
STT was originally introduced in lieu of capital gains tax. However, capital gains tax was subsequently brought back, and both taxes have since been increased, Shah pointed out. He said the combined burden affects domestic and foreign investors and called for a balance that supports investment.
Shah also highlighted the need to direct India’s savings towards productive investments rather than speculative activities. He cited Securities and Exchange Board of India (SEBI) research showing that retail traders lost nearly ₹4 lakh crore in futures and options (F&O) trading over five years.
India saves around 30% of its gross domestic product (GDP), and Shah believes the country can make better use of these savings by plugging leakages. These include losses arising from digital fraud, Ponzi schemes, cryptocurrency-related activities and gaming, alongside speculative trading. He argued that tax policy should encourage legitimate savings and investment rather than discourage investors looking to build wealth through financial markets.
Shah said he was encouraged that the Finance Ministry was listening to industry concerns, but he could not predict whether or when the government would act.
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Kotak AMC’s Nilesh Shah urges government to review STT and capital gains tax burden on investors
He pointed to a precedent in which an ordinance provided tax relief to investors in Indian government securities. A similar approach could help bring India’s tax framework closer to international practices and improve parity for global investors, he said.
However, Shah did not offer a timeline for any potential relief, including whether changes could come before the Union Budget 2027. For now, the key issue is ensuring that India’s tax policies support genuine investment while addressing concerns over the combined burden of STT and capital gains tax.
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