India to scrap capital gains tax on foreign investment in government bonds - ET

On early Thursday, a report from The Economic Times (ET) has shown that the Indian government plans to scrap capital gains tax on investments in government securities by foreign portfolio investors (FPIs), in an attempt to improve the inflow of foreign funds into the economy.

Additional announcements

Cabinet meet on Wednesday approved the scrapping of capital gains tax on foreign portfolio investment in government bonds.

Decision likely to be implemented via an ordinance amending Income Tax rules.

Foreign investors currently pay 12.5% long term capital gains tax on listed shares and bonds held for more than 12 months.

They also pay 20% withholding tax on interest earned in government bonds. This may be removed as well.

Foreign investors have maintained net positive flows into Indian government debt this year, investing a net amount of $1.4 billion, while nearly $28 billion has been pulled from equity markets.