Tax Exemptions for Foreign Investments: Centre

The Government of India has issued an ordinance granting tax exemptions to Foreign Portfolio Investors (FPIs) on interest income and capital gains from government securities to boost foreign inflows and stabilize the rupee. As per the notification dated June 5, the amendments to the Income Tax Act will be effective from April 1, 2026. The decision, approved by President Droupadi Murmu, aims to make India a more attractive destination for global investors amid rising economic uncertainties.

The government has also expanded the Fully Accessible Route (FAR) to include long-term government bonds and sovereign green bonds, while easing investment norms for FPIs. The Reserve Bank of India has supported these measures by relaxing rules for NRI deposits and encouraging foreign currency inflows. Experts believe these steps will increase foreign participation in debt markets, improve liquidity, and help contain the rupee’s decline, while also allowing the government to borrow at lower costs.