Mumbai, June 23: Foreign portfolio investors put in around Rs 35,000 crore so far this month in Indian bonds after the government exempted them from income tax on interest income and capital gains arising from investments in these bonds, according to Clearing Corporation of India Ltd (CCIL) data.
All these investments came under the Fully Accessible Route (FAR) of Indian government securities.
This is because FAR allows non-resident investors to invest in specified Government of India-dated securities without any investment ceilings, as per data.
FPI holdings in FAR securities stood at Rs 3.58 lakh crore on Tuesday, up from Rs 3.23 lakh crore on June 3, the data showed.
Prior to this, the foreign investors have poured Rs 5,512.108 crore in May and Rs 5,262.016 crore in April. However, there were outflows of Rs 17,687.988 crore in March.
The government on June 5 promulgated an ordinance amending the Income Tax Act to provide tax exemption on interest income and capital gains arising from the sale, exchange or transfer of government securities held by FPIs.
The exemption is applicable retrospectively from April 1, 2025.
Currently, foreign investors are subject to a long-term capital gains tax of 12.5 per cent on listed shares and bonds held for more than 12 months, while interest earned on government bonds attracts a withholding tax of 20 per cent.
The Reserve Bank of India (RBI), in its June monetary policy announcement, also expanded the universe of securities available under the FAR by including all new issuances of 15-year, 30-year and 40-year tenor government securities. (PTI)
