Quick Summary
The Government has released a detailed set of Frequently Asked Questions (FAQs) clarifying the proposed tax exemption for Foreign Institutional Investors (FIIs) investing in Government Securities (G-Secs). The clarification comes in the backdrop of proposed amendments under the Income-tax Act, 2025
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FAQ :
The proposed tax exemption aims to enhance the attractiveness of Indian government bonds for overseas investors and support the development of the domestic debt market by removing tax liabilities on interest income and capital gains.
The proposed ordinance seeks to exempt both interest income earned from Government Securities and capital gains arising from the transfer or redemption of these securities.
Under Section 210(6)(a) of the Income-tax Act, 2025, an FII is an investor notified by the Central Government. Foreign Portfolio Investors (FPIs) registered with SEBI have already been notified as FIIs for this purpose.
Listed Government Securities are considered long-term assets if held for over 12 months. Unlisted Government Securities become long-term assets if held for over 24 months. Securities held for shorter periods are treated as short-term capital assets.
As of May 12, 2026, total FPI investment in Government Securities stands at ₹3,75,171 crore, representing 3.34% of the total outstanding stock of ₹112.42 lakh crore.
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