- By Aditya Pratap Singh
- Tue, 09 Jun 2026 05:27 PM (IST)
- Source:JND
The government's moves to reverse the foreign investors' exodus from India's capital market seem to be paying off, as Foreign portfolio investors (FPIs) have invested Rs 8,794.743 crore in government securities under the Fully Accessible Route (FAR). Earlier, last week, the government exempted FPIs from income tax on interest income and capital gains arising from investments in these bonds.
According to data from the Clearing Corporation of India Ltd (CCIL), FPI holdings in FAR securities stood at Rs 3.32 lakh crore on Tuesday, up from Rs 3.23 lakh crore on June 3.
FAR is an instrument that allows non-resident investors to invest in specified Government of India dated securities without any investment ceilings.
"We can see the optimism from FPIs who nearly invested 75 per cent of the net purchase in G-secs under the FAR category recorded during April & May. It also strengthens India's case for inclusion in major global bond indices, such as Bloomberg's sovereign bond index, whose inclusion decision was deferred earlier this year," said Mataprasad Pandey, vice-president at Arete Capital.
Govt Brings Ordinance to Introduce Tax Exemptions
On June 5, the government issued an ordinance amending the Income Tax Act, exempting interest income and capital gains arising from the sale, exchange, or transfer of government securities held by FPIs from tax. This exemption will be effective from April 1, 2025.
This move comes as the government seeks to attract more foreign capital into the domestic debt market and support the rupee amid external pressures.
Currently, foreign investors are subject to a 12.5 per cent long-term capital gains tax on listed shares and bonds held for more than 12 months, while interest earned on government bonds is subject to a 20 per cent withholding tax.
RBI's Initiatives
The Reserve Bank of India, in its monetary policy announcement in June, also expanded the range of securities available under the FAR by including all new issues of government securities with 15-year, 30-year, and 40-year tenors.
The central bank also removed limits on short-term investments, concentration, and private securities for FPI investments under the common route.
"These measures, along with the tax benefits provided by the government this morning, should help attract foreign capital for government borrowing," the RBI said during the monetary policy announcement.
The government securities market has been opened further to foreign investors through these measures as India seeks to deepen the bond market and facilitate greater participation from global investors.
With Inputs From PTI