Newsletter
The Union Cabinet has approved a proposal to relax tax rules for certain foreign investors, making it easier and more attractive for them to invest in Indian securities.
What is happening: according to The Times of India, the government is planning to make it cheaper for foreign investors to invest in Indian government bonds (G-Secs). At present, foreign investors pay a 12.5% tax on profits earned from these bonds and a 20% tax on the interest income they receive.
Under the proposed changes, the government may completely remove the tax on profits from G-Sec investments and could also reduce or scrap the 20% tax on interest income. Some foreign investors may even be exempt from all taxes on these investments.
The main trigger: the proposed tax relief comes at a time when India is facing sustained pressure on both the rupee and foreign investment flows.
So far this year, foreign portfolio investors (FPIs) have pulled out ₹2.47 lakh crore from Indian markets, more than double the ₹1.04 lakh crore withdrawn in 2025.
At the same time, the rupee has weakened by around 6% against the US dollar and briefly touched a record low of 96.965 per dollar in May.
The pressure has been further amplified by the West Asia conflict, which has pushed up oil prices, weighed on investor sentiment, and increased concerns about capital outflows.
