Government Bond Tax Cut May Boost Foreign Investor Interest In India

India is reportedly moving to ease tax rules for foreign investors as the rupee faces pressure and FPI outflows continue.

Cabinet Move Targets Foreign Investors

The Union Cabinet has reportedly backed an ordinance to ease tax rules for foreign investors in certain securities, a move aimed at making Indian financial markets more attractive to overseas funds. The proposal comes at a time when the rupee has weakened, and foreign portfolio investors have pulled money from Indian equities. According to the report, FPIs have sold around Rs 2.25 lakh crore from domestic stock markets since January.

Why Government Bonds Matter

The key focus is expected to be India’s debt market, especially government securities. Reuters reported that India plans to remove the capital gains tax on foreign portfolio investments in government bonds. In contrast, foreign investors currently face long-term capital gains tax and withholding tax on interest income.

Final Details Still Awaited

The exact securities covered and the size of the tax relief are not yet fully clear. Reports suggest the move may be part of a wider plan to increase foreign inflows, support the rupee, and improve investor confidence in Indian bonds. A final notification is expected after the required approvals are completed.