India's Tax Reforms: Unlocking Liquidity Across Stocks, Forex, and Crypto?

Pushpendra Singh, an Indian crypto and finance educator, warned investors that they may face two years and three months of frustration due to pressure on the rupee and significant tax burdens. He proposed three key tax reforms: abolishing the Securities Transaction Tax (STT), removing the Long-Term Capital Gains Tax (LTCG), and reducing the Short-Term Capital Gains Tax (STCG). These proposals aim to reduce trading costs and increase liquidity across India's stocks, forex, and crypto markets.

The current STT on equity delivery is 0.1% on purchase and 0.1% on redemption, making the total round-trip cost 0.2%. On a ₹1 lakh buy-and-sell transaction, STT alone amounts to ₹200. Reducing or abolishing this tax could boost post-tax returns for investors.

The proposed reforms may also attract foreign capital into Indian equities, which would involve converting US dollars into rupees. This flow of USD-to-INR can boost the availability of dollars in the onshore forex markets, contributing to FX liquidity and supporting the rupee.