Foreign investors pour ₹35,000 cr in Indian bonds after govt tax exemption move – CNBC TV18

Foreign portfolio investors put in round ₹35,000 crore thus far this month in Indian bonds after the federal government exempted them from revenue tax on curiosity revenue and capital features arising from investments in these bonds, in keeping with Clearing Company of India Ltd (CCIL) information.

All these investments got here underneath the Absolutely Accessible Route (FAR) of Indian authorities securities.

It’s because FAR permits non-resident investors to speculate in specified Authorities of India-dated securities with none funding ceilings, as per information.

FPI holdings in FAR securities stood at ₹3.58 lakh crore on Tuesday, up from ₹3.23 lakh crore on June 3, the info confirmed.

Previous to this, the overseas investors have poured ₹5,512.108 crore in Might and ₹ 5,262.016 crore in April. Nonetheless, there have been outflows of ₹17,687.988 crore in March.

The federal government on June 5 promulgated an ordinance amending the Earnings Tax Act to offer tax exemption on curiosity revenue and capital features arising from the sale, change or switch of presidency securities held by FPIs.

The exemption is relevant retrospectively from April 1, 2025.

The move got here as the federal government appeared to draw extra overseas capital into the home debt market and assist the rupee amid exterior pressures.

At the moment, overseas investors are topic to a protracted-time period capital features tax of 12.5 per cent on listed shares and bonds held for greater than 12 months, whereas curiosity earned on authorities bonds attracts a withholding tax of 20%.

The Reserve Financial institution of India (RBI), in its June financial coverage announcement, additionally expanded the universe of securities out there underneath the FAR by together with all new issuances of 15-yr, 30-yr and 40-yr tenor authorities securities.

The central financial institution additionally eliminated limits associated to brief-time period funding, focus and particular person securities for FPI investments underneath the Basic Route.

”These measures together with the tax advantages offered by the federal government this morning ought to assist entice overseas capital for presidency borrowing,” the RBI stated in the course of the financial coverage announcement.

The federal government securities market has been opened additional to overseas investors by way of these measures as India seeks to deepen the bond market and facilitate better participation from international investors.

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