FPIs Pump ₹8,795 Crore Into Govt Securities After Tax Exemption
· Free Press Journal
After the Centre's move to attract foreign capital through exempting interest income and capital gains from government securities, FPIs have responded in kind.
Foreign portfolio investors (FPIs) have invested ₹8,794.743 crore in government securities under the Fully Accessible Route (FAR) after the Centre exempted them from income tax on interest income and capital gains arising from these investments.
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Data from the Clearing Corporation of India Ltd (CCIL) shows that FPI holdings in FAR securities rose to ₹3.32 trillion on Tuesday from ₹3.23 trillion on June 3, Press Trust of India reported.
India Scraps Long-Term Capital Gains Tax On Foreign Investors In Govt BondsFAR allows non-resident investors to buy specified Government of India dated securities without any investment ceilings.
Mataprasad Pandey, vice-president at Arete Capital, was cited as saying that FPIs accounted for nearly 75% of net purchases in FAR G-secs during April and May.
He added that the inflows strengthen India’s case for inclusion in major global bond indices, such as Bloomberg’s sovereign bond index, which had postponed its decision earlier this year.
On June 5, the government amended the Income Tax Act via ordinance to provide retrospective tax exemption from April 1, 2025, on interest and capital gains from government securities held by FPIs.
RBI Announces Major Reforms To Boost Foreign Capital Inflows; Expands G-Sec Access For Overseas InvestorsPreviously, foreign investors were subject to a 12.5% long-term capital gains tax on bonds held over 12 months, and interest income attracted a 20% withholding tax.
The Reserve Bank of India (RBI), in its June monetary policy statement, expanded the FAR universe to include all new 15-year, 30-year, and 40-year government securities and removed limits on short-term investments, concentration, and individual securities under the general route.
The RBI said these steps, along with government tax incentives, should attract more foreign capital for government borrowing.
These measures aim to deepen India’s government securities market, encourage greater global participation, and strengthen domestic debt financing.