The Income Tax (Amendment) Ordinance from 2026 was promulgated and published in the Gazette of India (Extraordinary) on June 5, 2026. The Ordinance is effective retrospectively from April 1, 2026 and introduces a significant change to the tax regime applicable to Foreign Portfolio Investors (FPIs) investing in Indian government securities.
Recent development
Key impacts
Effective April 1, 2026, exemption on interest income and capital gain on government securities for FPIs:
KPMG comment
This Ordinance marks a fundamental change in India’s tax treatment of foreign investment in government securities. By removing tax on both interest income and capital gains for FPIs, India has moved to a fully exempt regime for investments in government securities. The change is intended to encourage greater foreign participation in the sovereign debt market and is expected to support increased foreign exchange inflows.
You can find some more details in the Newsflash published by our KPMG India office.
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