Lok Sabha passes bill exempting Foreign Institutional Investors from tax on Indian bonds

Why in news

The Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, to exempt Foreign Institutional Investors (FIIs) from tax on Indian government securities to boost capital inflows.

Background

The bill exempts FIIs from income tax on interest earnings and capital gains from Indian government securities. The exemption applies to investments made on or after April 1, 2026, aiming to align India's tax regime with global standards.

Facts for Prelims

• Act / BillTaxation and Other Laws (Amendment) Bill, 2026
• FactExemption applies to investments made on or after April 1, 2026
• FactExemption covers both interest earnings and capital gains from Indian government securities

For Mains

Q. Discuss how fiscal policy measures like tax exemptions for Foreign Institutional Investors can influence India's capital market depth and long-term investment stability.

Dimensions to cover in your answer

• Attracting long-term capital
• Global tax alignment
• Impact on domestic vs. foreign investment
• Fiscal revenue trade-offs

Keywords: Capital Inflow · Fiscal Policy · Tax Neutrality · Market Liberalization · Foreign Institutional Investors

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