Govt to replace Ordinance by introducing Income Tax (Amendment) Bill in Monsoon session
The government will introduce the Income-tax (Amendment) Bill, 2026, in the Monsoon Session to replace the ordinance exempting foreign investors from tax on interest and capital gains from government securities. The move is aimed at drawing stable overseas capital, deepening the sovereign debt market and easing pressure on the rupee amid global volatility.
- Jul 17, 2026,
- Updated Jul 17, 2026 1:31 PM IST
The government will introduce the Income-tax (Amendment) Bill, 2026, in the Monsoon Session of Parliament beginning July 20 to replace the Income Tax (Amendment) Ordinance, 2026, according to the list of new bills to be tabled in the upcoming session.
The proposed law is aimed at replacing the ordinance that exempted foreign investors from income tax on interest earnings and capital gains from investment in government securities. The ordinance was promulgated last month to attract foreign capital and ease pressure on the depreciating rupee amid the West Asia crisis.
According to the government, the Bill seeks to deepen India's sovereign debt market, attract stable global capital inflows and enhance liquidity in view of the prevailing global macro-economic environment, which has been marked by significant volatility arising from geopolitical uncertainties, sharp increases in crude oil prices and disruptions in global supply chains.
The government had exempted foreign investors from income tax on interest earnings and capital gains from government securities as it looked to draw foreign capital to counter pressure on the rupee. A gazette notification dated June 5 said the government had promulgated an ordinance to amend the Income Tax Act to provide tax exemptions on interest income and capital gains arising from the sale, exchange or transfer of government securities, with effect from April 1.
Foreign investors are subject to a long-term capital gains tax of 12.5 per cent on listed shares and bonds held for more than 12 months. They also pay a withholding tax of 20 per cent on interest earned on government bonds.
The ordinance, signed by President Droupadi Murmu, defines the BIS as the international financial institution established in 1930 and headquartered in Basel, Switzerland. It also refers to the existing statutory definitions of FIIs and government securities under Indian law.
The gazette notification had said the ordinance was necessary as Parliament was not in session and immediate action was required, invoking the President's ordinance-making powers under Article 123 of the Constitution.
Besides this Bill, the government is set to present Demands for Excess Grants for the year 2022-23. It will also introduce the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026, in the House.
The MSME Bill seeks to align the Micro, Small and Medium Enterprises Development Act, 2006, with the changing MSME landscape, enhance Ease of Doing Business and bring trust-based regulations in the MSME ecosystem. It also aims to strengthen the mechanism for addressing delayed payments, provide for enforcement of arbitral awards for MSEs, and introduce flexibility and enabling provisions for states to decide the composition of the Micro and Small Enterprises Facilitation Council.
Overall, the Monsoon Session beginning July 20 is set to see the introduction of the Income-tax (Amendment) Bill, 2026, to replace the ordinance on tax exemptions for foreign investors in government securities, along with Demands for Excess Grants for 2022-23 and the MSME amendment Bill.
The government will introduce the Income-tax (Amendment) Bill, 2026, in the Monsoon Session of Parliament beginning July 20 to replace the Income Tax (Amendment) Ordinance, 2026, according to the list of new bills to be tabled in the upcoming session.
The proposed law is aimed at replacing the ordinance that exempted foreign investors from income tax on interest earnings and capital gains from investment in government securities. The ordinance was promulgated last month to attract foreign capital and ease pressure on the depreciating rupee amid the West Asia crisis.
According to the government, the Bill seeks to deepen India's sovereign debt market, attract stable global capital inflows and enhance liquidity in view of the prevailing global macro-economic environment, which has been marked by significant volatility arising from geopolitical uncertainties, sharp increases in crude oil prices and disruptions in global supply chains.
The government had exempted foreign investors from income tax on interest earnings and capital gains from government securities as it looked to draw foreign capital to counter pressure on the rupee. A gazette notification dated June 5 said the government had promulgated an ordinance to amend the Income Tax Act to provide tax exemptions on interest income and capital gains arising from the sale, exchange or transfer of government securities, with effect from April 1.
Foreign investors are subject to a long-term capital gains tax of 12.5 per cent on listed shares and bonds held for more than 12 months. They also pay a withholding tax of 20 per cent on interest earned on government bonds.
The ordinance, signed by President Droupadi Murmu, defines the BIS as the international financial institution established in 1930 and headquartered in Basel, Switzerland. It also refers to the existing statutory definitions of FIIs and government securities under Indian law.
The gazette notification had said the ordinance was necessary as Parliament was not in session and immediate action was required, invoking the President's ordinance-making powers under Article 123 of the Constitution.
Besides this Bill, the government is set to present Demands for Excess Grants for the year 2022-23. It will also introduce the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026, in the House.
The MSME Bill seeks to align the Micro, Small and Medium Enterprises Development Act, 2006, with the changing MSME landscape, enhance Ease of Doing Business and bring trust-based regulations in the MSME ecosystem. It also aims to strengthen the mechanism for addressing delayed payments, provide for enforcement of arbitral awards for MSEs, and introduce flexibility and enabling provisions for states to decide the composition of the Micro and Small Enterprises Facilitation Council.
Overall, the Monsoon Session beginning July 20 is set to see the introduction of the Income-tax (Amendment) Bill, 2026, to replace the ordinance on tax exemptions for foreign investors in government securities, along with Demands for Excess Grants for 2022-23 and the MSME amendment Bill.