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India Scraps Capital Gains Tax on FII Government Bond Investments

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The Indian government on Friday removed the capital gains tax, both long-term and short-term, on investment by foreign institutional investors (FIIs) in government bonds as well as the withholding tax they must pay on the interest income from these debt instruments.

India has exempted FIIs and ​the Bank for International Settlements from CGTs on receipts arising from interest or sale of government securities.

The exemption will take effect retrospectively from ​April 1, according to a statement by the Ministry of Finance.

At present, FIIs pay 12.5% tax on long-term capital gains, 30% on short-term capital gains, and around 20% withholding tax on interest income.

The move is seen as an attempt to rein in the fall in the value of the Indian rupee and attract more foreign investment.

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