India has published the Income-Tax (Amendment) Commencement Ordinance 2026, introducing targeted tax exemptions on interest income and capital gains from government securities for specified foreign entities, including Foreign Institutional Investors and the Bank for International Settlements, subject to compliance conditions. 

RF Report

India has published the Income-Tax (Amendment) Commencement Ordinance 2026 in the Official Gazette on 5 June 2026, introducing a targeted set of tax reforms aimed at strengthening foreign participation in Indian Government securities markets.

The Ordinance is designed to encourage greater global investment by modifying the Income-tax Act, 2025 to provide specific tax exemptions on interest income and capital gains arising from qualifying investments in government securities.

Under the new framework, designated categories of foreign investors—most notably Foreign Institutional Investors and the Bank for International Settlements—will benefit from tax relief on eligible income streams, provided they comply with prescribed reporting and regulatory requirements.

To ensure legal clarity and administrative certainty, the Ordinance sets out precise definitions of both eligible entities and the types of government securities that fall within the scope of the exemption regime. This is intended to reduce ambiguity in application and support consistent enforcement.

The regulatory changes have been applied retrospectively from 1 April 2026, thereby confirming the tax-exempt status of qualifying transactions from the start of the current fiscal period and reinforcing the government’s objective of improving investor confidence in Indian sovereign debt instruments.