India plans to eliminate the capital gains tax on foreign portfolio investments in government securities [1].
This move is designed to lure more international capital into the country's debt market. By removing these tax barriers, the government aims to increase inflows into government bonds and provide critical support for the stability of the rupee [1], [2].
Reports of the plan first surfaced on June 4, 2026 [1]. A source familiar with the matter said, "India plans to scrap capital gains tax on foreign portfolio investments in government securities, which could help boost such inflows" [1].
The policy shift targets specific investment vehicles to make the Indian market more competitive globally. According to an industry source, foreign investors and the Bank for International Settlements have been exempted from capital gains tax on interest, and the sale of government bonds [2].
The decision follows a broader strategy by the Finance Ministry to integrate India more deeply into global financial systems. By lowering the cost of entry for foreign institutional investors, the government hopes to diversify its funding sources and reduce reliance on domestic borrowing alone [1], [2].
Financial analysts suggest that the removal of these taxes reduces the risk for overseas investors who previously faced unpredictable tax liabilities on their gains. This change is expected to make Indian government securities a more attractive asset class compared to other emerging market bonds [2].
“India plans to scrap capital gains tax on foreign portfolio investments in government securities”
This policy change signals India's aggressive push to attract global liquidity. By removing capital gains taxes for foreign bondholders, India is aligning its fiscal policy with other major emerging economies to lower the cost of capital. This is a strategic move to stabilize the currency and ensure a steady stream of foreign investment during periods of global economic volatility.
