New Delhi: The government is set to introduce the Income-tax (Amendment) Bill in the upcoming Monsoon Session of Parliament to replace the ordinance that granted income tax exemption to foreign investors on interest earnings and capital gains from investment in government securities (G-secs).
The ordinance was promulgated last month to attract foreign capital and ease pressure on the rupee amid the West Asia crisis. According to the list of new bills to be tabled in the session beginning July 20, the Income-tax (Amendment) Bill, 2026, will replace the Income Tax (Amendment) Ordinance, 2026.
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The proposed legislation aims to deepen India’s sovereign debt market, attract stable global capital inflows and improve liquidity in a volatile global environment marked by geopolitical tensions, higher crude oil prices and supply chain disruptions, according to the government.
To draw foreign capital and support the rupee, the government had exempted foreign investors from income tax on interest income and capital gains from government securities. A gazette notification dated June 5 said the ordinance, effective from April 1, amended the Income Tax Act to provide tax exemptions on income from the sale, exchange or transfer of government securities.
Reform aimed at attracting stable global capital inflows
At present, foreign investors pay 12.5 percent long-term capital gains tax on listed shares and bonds held for more than 12 months. They also face a 20 percent withholding tax on interest earned on government bonds.
The ordinance, signed by President Droupadi Murmu, defines the Bank for International Settlements (BIS) as the international financial institution established in 1930 and headquartered in Basel, Switzerland. It also refers to the statutory definitions of foreign institutional investors and government securities under Indian law.
The notification had said immediate action was necessary as Parliament was not in session, invoking the President’s ordinance-making powers under Article 123 of the Constitution.
Along with the tax Bill, the government is also set to present Demands for Excess Grants for 2022-23 in the House. It will also introduce the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026.
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The MSME amendment Bill seeks to align the 2006 law with the changing MSME landscape, improve ease of doing business, introduce trust-based regulation, strengthen mechanisms to address delayed payments, enable enforcement of arbitral awards for micro and small enterprises, and give states flexibility in the composition of Micro and Small Enterprises Facilitation Councils.
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