India may cut bond taxes, ease investment rules to attract foreign capital: Report
As per news reports, the Union Cabinet is expected to consider proposals as early as this week that could significantly reduce the tax burden on foreign funds investing in Indian bonds.
- Jun 3, 2026,
- Updated Jun 3, 2026 2:44 PM IST
India is preparing a fresh set of measures aimed at attracting overseas capital, including tax relief for foreign investors and easier access to government bonds, according to a Bloomberg News report citing people familiar with the matter.
The report said the Union Cabinet is expected to consider proposals as early as this week that could significantly reduce the tax burden on foreign funds investing in Indian bonds. Among the measures under consideration is either the removal of the existing 20% tax on interest income earned from bonds by overseas investors or a substantial reduction in the levy.
The move is part of broader efforts by Indian authorities to make domestic debt markets more attractive to global investors and boost foreign capital inflows at a time when the rupee has come under pressure.
Separately, the Reserve Bank of India (RBI) is likely to expand the list of government securities available under the Fully Accessible Route (FAR), Bloomberg News reported. The proposal would allow foreign investors to purchase certain long-duration sovereign bonds without any investment limits. The RBI last revised the FAR framework in 2024, when it excluded 14-year and 30-year government securities from the list.
As per the report, the Finance Ministry and the RBI did not respond to requests for comment. The report noted that the central bank had earlier recommended reducing taxes on foreign bond investors.
The policy push comes as the Indian rupee has faced significant volatility this year. The currency touched a record low of 96.9650 against the US dollar on May 20 before recovering somewhat amid central bank intervention and easing global crude oil prices.
India’s currency has been affected by a combination of factors, including rising oil import costs, foreign portfolio outflows, global trade tensions linked to US tariff measures, and geopolitical uncertainty stemming from the Iran conflict. Prime Minister Narendra Modi has also urged citizens to conserve foreign exchange reserves amid elevated external pressures.
The report further stated that the government is expected to notify rules allowing Persons Resident Outside India (PROIs) to invest in shares of listed Indian companies through the Portfolio Investment Scheme. The proposed change would widen investment opportunities for overseas individuals and further support the government's efforts to deepen foreign participation in Indian financial markets.
India is preparing a fresh set of measures aimed at attracting overseas capital, including tax relief for foreign investors and easier access to government bonds, according to a Bloomberg News report citing people familiar with the matter.
The report said the Union Cabinet is expected to consider proposals as early as this week that could significantly reduce the tax burden on foreign funds investing in Indian bonds. Among the measures under consideration is either the removal of the existing 20% tax on interest income earned from bonds by overseas investors or a substantial reduction in the levy.
The move is part of broader efforts by Indian authorities to make domestic debt markets more attractive to global investors and boost foreign capital inflows at a time when the rupee has come under pressure.
Separately, the Reserve Bank of India (RBI) is likely to expand the list of government securities available under the Fully Accessible Route (FAR), Bloomberg News reported. The proposal would allow foreign investors to purchase certain long-duration sovereign bonds without any investment limits. The RBI last revised the FAR framework in 2024, when it excluded 14-year and 30-year government securities from the list.
As per the report, the Finance Ministry and the RBI did not respond to requests for comment. The report noted that the central bank had earlier recommended reducing taxes on foreign bond investors.
The policy push comes as the Indian rupee has faced significant volatility this year. The currency touched a record low of 96.9650 against the US dollar on May 20 before recovering somewhat amid central bank intervention and easing global crude oil prices.
India’s currency has been affected by a combination of factors, including rising oil import costs, foreign portfolio outflows, global trade tensions linked to US tariff measures, and geopolitical uncertainty stemming from the Iran conflict. Prime Minister Narendra Modi has also urged citizens to conserve foreign exchange reserves amid elevated external pressures.
The report further stated that the government is expected to notify rules allowing Persons Resident Outside India (PROIs) to invest in shares of listed Indian companies through the Portfolio Investment Scheme. The proposed change would widen investment opportunities for overseas individuals and further support the government's efforts to deepen foreign participation in Indian financial markets.