Why FIIs Are Selling India – A Simple Explanation > Suppose a foreign investor makes 12% returns from Indian stocks. > But if the rupee weakens by 3-4%, the real return in dollar terms drops to 8%. > Now, add India’s capital gains tax of 12.5% to 20%, and the effective return falls further to 6-7%. > In contrast, most developed countries (like the U.S., UK, and Japan) don’t charge foreign investors capital gains tax. > Meanwhile, U.S. Treasury bonds offer a risk-free 5% return. For many foreign investors, the combination of currency risk, taxes, and alternative safer investments makes India less attractive.