India scraps tax on overseas bond investors in bid to attract foreign capital
A moneylender counts Indian rupee notes in his shop in Ahmedabad, India.
Amit Dave | Reuters
India doubles down on measures aimed at attracting foreign portfolio investments amid capital outflows reached a record level.
The government announced on Friday exempt foreign investors and would exempt the Bank for International Settlements, a global financial institution owned by central banks, from income taxes on any interest or capital gains.
The exemption will be valid as of April 1, 2026, according to the government’s statement.
Foreign investors face 12.5% long-term capital gains tax 20% withholding tax on interest earned on listed shares and bonds and government bonds held for more than 12 months.
On Friday, the Reserve Bank of India also announced the following in its monetary policy: expansion of the government bond bouquet It allows non-resident investors to park their funds while also removing restrictions on “short-term investment, concentration and individual securities” for foreign portfolio investors.
All these measures, along with the numerous trade agreements India has signed, “BOP (balance of payments) is much better this year” What will happen otherwise, RBI Governor Sanjay Malhotra said in a press conference on Friday.
The central bank also said that limits on investing in stocks without registering with India’s capital markets regulator have been increased for non-resident Indians and those holding India’s overseas citizenship.
Since the beginning of the year, sales by foreign investors in Indian securities have been concentrated especially in stocks. Foreign investors have sold $27.6 billion worth of Indian stocks since January, according to data from Indian depository NSDL; This figure was 18.9 billion dollars in total in 2025.
These sales, coupled with a rising import bill due to a rise in global oil prices, have put pressure on the Indian rupee, making it among Asia’s worst-performing currencies.
Krishna Bhimavarapu, Asia Pacific economist at State Street Global Advisors, told CNBC that moves to facilitate capital inflows will mostly help the rupee, which has fallen due to strong foreign exchange outflows.
He added that it was “a step in the right direction” and that the announcement came at a “very good time”. Year-to-date, the rupee has fallen more than 6%, according to LSEG data.
