The Indian tax establishment poses the greatest threat to the country’s growth narrative by repeatedly targeting the same taxpayer base, warned Complete Circle CIO Gurmeet Chadha on Monday, as controversy mounted over a proposed tax hike on share sale profits made through limited liability partnerships (LLPs).

“First by increasing capital gains tax we drove the FPIs away, now we want to ensure even promoters and family offices look at other options,” Chadha said, reacting to a report on the new Income Tax Bill. “Biggest risk to India story is our tax think tank… keeps finding new ways to tax same set of people again and again,” he posted on X.

Chadha’s comments followed an Economic Times report outlining how Indian promoters and family offices—many of whom route investments through LLPs—face a steep jump in taxes under the proposed law. If enacted in its current form, the new Bill would raise the effective tax on long-term capital gains for LLPs from 12.5% to 18.5% by applying the Alternative Minimum Tax (AMT) to these entities.

Over the past decade, LLPs have emerged as a flexible, low-tax vehicle for holding company shares, investing in private equity, and managing family wealth. However, the expanded AMT provision would now apply regardless of whether such LLPs claim tax deductions or exemptions, effectively increasing their tax burden by 6%.

Currently, AMT applies only if deductions significantly lower the tax liability below 18.5%. LLPs that function solely as holding outfits and claim no such deductions remain exempt. The proposed law eliminates this distinction, capturing even clean capital gain structures under the 18.5% floor.

PwC India partner Bhavin Shah noted that the select committee reviewing the Bill has acknowledged unintended consequences and may introduce clarifications for non-corporate assessees who do not claim exemptions.

Ashish Karundia, founder of CA firm Ashish Karundia & Co., warned that imposing AMT on clean LLP structures would sharply raise their tax load and reduce their appeal. “Such a move could undermine the attractiveness of firms and LLPs for startups and family offices in India,” Karundia said, adding it could also contradict broader goals of building India as a global financial hub.