To boost foreign capital inflows, India has scrapped long-term capital gains tax on investments by foreign institutional investors (FIIs) in government securities through an Ordinance issued on Friday. The move is aimed at making Indian debt markets more attractive to overseas investors and supporting the rupee amid rising crude oil prices and geopolitical uncertainties.
The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the ordinance to amend the Income Tax Act and enable the exemption. At present, foreign investors pay a 12.5% long-term capital gains tax on listed equities and bonds held for more than a year, while interest earned on government securities is also subject to a 20% withholding tax.
