New Delhi, June 5 -- The Centre has promulgated the Income-tax (Amendment) Ordinance, 2026, granting tax exemption to Foreign Institutional Investors (FIIs) on capital gains and interest income arising from investments in government securities (G-Sec).

The Ordinance, published in the Gazette of India on Friday, amends the Income-tax Act, 2025. It has been brought into force retrospectively from April 1, 2026.

According to the notification, "Any interest on Government security, and any capital gains arising from the sale, exchange or transfer of such Government security" shall be exempt in the case of "a foreign institutional investor."

The exemption, however, comes with a compliance condition. The Gazette states that "Such exemption sh...