For Effective April 1, 2026, exemption on interest income and capital gain on government securities for FPIs:
| Income Nature | Nature of income Existing Taxability | Proposed Taxability (with effect from April 1, 2026) |
| Capital gain on transfer of Government securities | Long-term capital gain – 12.5%* Short-term capital gain – 30%* | Exempt |
| Interest income on Government securities | Interest income – 20%* | Exempt |
Read more at: Income Tax Compliance Calendar has changed significantly for AY 2026-27
*To be increased by applicable surcharge and health and education cess. Further, tax treaty exemption (if any) to be considered separately
This Ordinance marks a fundamental change in tax treatment of foreign investment in governments securities. By removing tax on both interest income and capital gains for FPIs, India has moved to a fully exempt regime for investments in government securities. The change is intended to encourage greater foreign participation in the sovereign debt market and is expected to support increased foreign exchange inflows
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