India exempts FPIs from capital gains and interest tax on government securities
The tax exemption is aimed at drawing more foreign money into India’s bond market, supporting capital inflows and helping stabilize the rupee.
Fact Check
India's Ministry of Finance PIB press release (PRID 2269169) and the Income-tax (Amendment) Ordinance, 2026 explicitly exempt FPIs from income tax on interest and capital gains arising from Government securities, effective 1 April 2026, with the stated goal of deepening the G-Sec market and attracting foreign portfolio investment. Reuters and CNBC corroborate that the measure targets foreign bond investors to draw more capital into sovereign debt.
Summary
India has exempted foreign portfolio investors from capital gains tax and tax on interest income from government securities, a move designed to encourage overseas participation in the country’s bond market. The exemption targets a key friction for foreign investors in sovereign debt and is intended to improve the appeal of Indian government securities relative to other markets. The measure also aims to attract capital inflows that could help support the rupee amid broader economic pressures.
Terms & Concepts
- foreign portfolio investors: Overseas investors buying financial assets
- government securities: Sovereign bonds issued by a government
- capital gains tax: Tax on profits from asset sales