Government exempts FIIs from capital gains tax in G-Secs investments; Details here

The government has promulgated the Income-Tax (Amendment) ordinance, 2026, targeted at tax exemptions aimed at increasing foreign investments in Indian Government securities.

Key Highlights Of The Ordinance

The Ordinance amends Schedule IV of the Income-tax Act, 2025, by inserting two new categories, 13D and 13E, that provide tax relief on specific financial instruments.

Under these new entries, interest earned on Government securities, as well as capital gains arising from the sale, exchange, or transfer of such securities, are now exempt from income tax for specific entities. There will also be no withholding tax on investments in government securities.

Who Are The Benefits Granted To?

Foreign institutional investors (FIIs) as defined under the relevant provisions of the Income-Tax Act, 2025, and Banks for International Settlements (BIS) as defined as the institution established in 1930 and headquartered in Basel, Switzerland.

To avail of these exemptions, eligible entities are required to furnish information in a prescribed form and manner, ensuring transparency and regulatory oversight. The ordinance is deemed to have come into force retrospectively from April 1, 2026.

What Are The Changes To The Fully Accessible Route?

Government Securities under the Fully Accessible Route (FAR) have also been expanded to include all new issuances of 15-, 30-, and 40-year tenor government securities.

The Fully Accessible Route (FAR) is a RBI rule that allows non-residents to invest in specific government securities without any quantitative limits or investment caps.

Additionally, the limits on investments by non-resident Indians and overseas citizens of India in listed stocks without SEBI registration are being increased.

All individual Persons Resident Outside India (PROIs) are also proposed to be extended the same facility on par with NRIs and OCIs, Governor Malhotra said in his speech.

A facility for concessional forex swaps is being provided till September 30, 2026, to incentivise three- to five-year external commercial borrowings (ECBs) by central public sector enterprises (CPSE).

This is breaking news and will be updated with more details.

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