Mumbai, June 5 -- The government on Friday announced a tax exemption on interest income and capital gains earned by Foreign Portfolio Investors (FPIs) from investments in government securities (G-Secs). The move is aimed at attracting long-term foreign capital and deepening India's bond market.

The exemption will apply to interest income and capital gains arising from investments in government securities on or after 1 April 2026. Similar tax relief has also been extended to the Bank for International Settlements (BIS) for income earned from investments in G-Secs.

The Finance Ministry said the move aligns India's tax treatment of government securities with several global markets and is expected to encourage greater participation from pen...