India’s Onerous Taxes are a Buzz-Kill for Likes of Carson Block

Amid a world-beating run, foreign funds are returning to India’s stock market. Still, they must set aside one of the main complaints made by investors such as Carson Block, founder of Muddy Waters Capital LLC, over the high taxation in the nation.

Global funds have been heavy Purchasers this year, but they made their first weekly acquisition of local equities in 2025 this week. They cite New Delhi’s tax policy, which imposes substantial capital gains levies on foreign investors and an unclear economic future. This strategy differs from other nations vying for their business, including China.

According to Block, India must adopt a different strategy to draw in global investment. Prashant Kothari, a senior investment manager at Pictet Asset Management’s emerging stocks unit, supports that opinion.

“Global capital is always in competition,” Kothari stated. India’s capital gains taxes alter investors’ calculations, and he said that reduced rates will encourage more significant investment.

India has ignored calls to change the capital gains tax on international funds. Consultants said the administration wants to treat immigrants and natives equally. There isn’t much evidence that this will change. A representative of the Finance Ministry in New Delhi did not answer a request for comment from Channel.

According to statistics from Channel, foreign funds have removed almost $15 billion from the Indian stock market this year. With the support of rising bets on rate reduction and the addition of Indian bonds to international indexes last year, they have shifted in the other way in the nation’s debt market.

Known for taking several short bets on Chinese businesses, Block traveled to India early this year to launch a fund. However, he stated that foreign fund managers must be able to predict with reasonable accuracy how much capital gains tax would lower returns, which is partially dependent on performance if they cannot avoid paying it. “That analysis, of course, can become subjective,” he emailed Channel.

Setting up shop in Gujarat International Finance City, a financial center with laxer regulations in Prime Minister Narendra Modi’s home state, is one of the ways investors might lower their tax costs. “That means hiring local people,” said Sunil Badala, head of tax at KPMG in India. For more minor overseas money, it is thus impossible.

Investors in debt have choices. Bond funds have been exposed to rupee-denominated debt without having to pay local taxes because of the sale of rupee bonds abroad by the World Bank, the European Bank for Reconstruction & Development, and the Asian Development Bank.

Damien Buchet, chief investment officer of Finisterre Capital, a division of Principal Asset Management, stated, “I don’t have to own those when I compare the attractiveness of the Indian local bond trade with the level of complication.” “I can easily duplicate that stance using a few supranational bonds with no tax implications.”