5 days ago
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Government of India (GoI) passed an ordinance waiving the 12.5% agelong word superior gains taxation (LTCG) charged connected overseas organization concern successful authorities bonds , according to a connection released 5 June.
The exemption volition instrumentality effect from 1 April 2026. “Recognising the value of a competitory taxation authorities successful attracting planetary capital, the Government has decided to rationalise the taxation attraction applicable to investments by FPIs successful Government Securities, by exempting specified investments from income taxation connected immoderate involvement oregon superior gain. This measurement volition align the taxation connected G-Secs with galore comparable jurisdictions,” the connection read.
Further, the authorities besides announced that 15, 30 and 40 twelvemonth bonds volition beryllium added to concern nether afloat accessible way (FAR) framework, that allows non-residents to put successful circumstantial authorities securities, known arsenic “specified securities,” without facing immoderate quantitative restrictions. Sovereign Green Bonds(SGBs) person besides been included successful the FAR handbasket of securities. Caps connected investment, attraction and information omniscient limits connected FPI concern done the wide way were besides removed portion keeping the wide quantitative concern bounds of six percent of the outstanding banal of the Central Government securities and 2 percent of the State Government securities (SGSs).
The determination comes astatine a clip erstwhile FIIs sold ₹2.5 lakh crore worthy of Indian securities, going by information from NSDL. However the larger portion of the exit came connected relationship of selling successful equity and not indebtedness securities. To beryllium sure, FIIs person been nett buyers of FAR bonds successful 4 of the past six period successful calendar twelvemonth 2026. As of June 5 2026, FIIs bought ₹16,567 crore successful FAR bonds and sold conscionable ₹4025 crore successful wide route. In equities however, the income has been implicit ₹2.6 lakh crore , being 1 of the important sources of rupee depreciation against the dollar.
“In applicable terms, this would marque Indian authorities securities much tax-efficient for overseas investors and could assistance pull stronger overseas inflows into the enslaved market. The connection is being discussed arsenic an ordinance-based amendment to the taxation law, truthful the last presumption volition beryllium connected the substance of the notification and erstwhile it comes into force,” said CA Chandni Anandan, Tax Expert astatine ClearTax
Experts portion welcoming the determination besides are cautious of the intended effects connected FII flows.
“The 2 pools of superior are antithetic investors with antithetic mandates and antithetic instrumentality expectations. Making gilts cheaper to ain does not code wherefore long-only equity investors person been cautious connected India. The superior gains structure, the currency risk, the valuation premium implicit peers. That is wherever the soundlessness is. The existent inquire from overseas investors has ever been connected equities. That remains unanswered,”
Further expanding the bounds for Person of Indian Origin and NRIs to put successful Indian banal markets were announced successful the budget. The notification amending the Foreign Exchange Management Act has besides been made , according to the statement. To beryllium sure, the stock of NRIs successful Nifty listed companies person not crossed 1% successful the past decade.
