In a move aimed at attracting greater foreign capital inflows, the Government of India has issued an Ordinance to exempt foreign institutional investors (FIIs) from capital gains tax on investments in government securities (G-Secs).

The Ordinance introduces amendments to the Income Tax Act, removing the long-term capital gains tax burden on eligible investments made by foreign investors in government bonds.

The decision is intended to encourage the inflow of long-term and stable foreign capital into India's debt market, particularly as government securities typically have longer maturities and are viewed as relatively low-risk investment instruments.

By enhancing the post-tax returns available to overseas investors, the measure is expected to improve the attractiveness of Indian government bonds, support foreign portfolio inflows, and potentially help lower borrowing costs over time.