FPIs must accept existing tax structure, says SEBI chief Tuhin Kanta Pandey

The Sebi chairman also took a firm stance on corporate transparency, warning that some companies are engaging in misleading disclosures.

Foreign portfolio investors (FPIs) must "live with" the existing tax structure, asserting that there is no need to unsettle the current system,  Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey recently stated.

Speaking at the Business Today Mindrush 2025 event on Saturday, Pandey also warned against "blatantly false disclosures" by companies, stating that Sebi will take strict action against such malpractices.

Addressing the gathering, Pandey also highlighted India's economic strengths, including stable inflation, fiscal consolidation, and strong capital formation. He argued that the country's consistent economic performance, delivering over 11% annual returns on the MSCI index over the past five years, makes it an attractive destination for investors.

"If some certainties have already come in terms of taxation, let us not unsettle it," Pandey said, addressing concerns over FPIs being required to pay long-term capital gains tax at 12.5 percent from April 1, up from the earlier 10 percent.

Despite some FPI outflows in 2024, attributed to global events, Pandey assured that India's tax system has evolved to accommodate investors and recent budgetary measures have been designed to facilitate their concerns.

The Sebi chairman also took a firm stance on corporate transparency, warning that some companies are engaging in misleading disclosures. He stated that Sebi’s surveillance systems are identifying entities involved in such malpractices.

Pandey expressed concerns about the derivatives market, particularly the risks faced by retail investors. Citing Sebi's study, he noted that "nine out of ten retail investors have lost money in the F&O (futures and options) market."

He pointed out that the market appears skewed in favour of large institutional investors. "It cannot be a one-way street where only large organized players make money while retail investors consistently lose," he said.

To address market stability issues, Sebi is considering changes in how trading volumes are measured. "Notional interest can be misleading when comparing options and futures - it’s like comparing apples and oranges. In the case of options, premiums are more important," he clarified.

Pandey also raised concerns about market volatility on expiry days when a surge in trading minutes before expiry causes instability. Sebi has released a discussion paper seeking industry feedback to address this issue.

Beyond derivatives trading, Pandey detailed Sebi’s ongoing efforts to protect retail investors. These include Aadhaar-based KYC authentication for seamless market entry, safeguards against broker defaults affecting investor assets, and the recent DigiLocker integration to help recover unclaimed investments.