New Delhi, June 5 -- The Centre on Friday promulgated the Income-tax (Amendment) Ordinance, 2026, exempting Foreign Institutional Investors (FIIs) from paying tax on interest income and capital gains earned from investments in Government securities, a move aimed at attracting stable long-term foreign capital and deepening India's bond market.

The Ordinance, promulgated because Parliament is not in session, it amends Schedule IV of the Income-tax Act, 2025, and is deemed to have come into force from April 1, 2026.

According to the Gazette notification, a new entry has been inserted in the tax-exempt income schedule to provide that "any interest on Government security, and any capital gains arising from the sale, exchange or transfer of s...