The Centre may reduce taxes on bond investments by foreign funds.
The RBI is considering wider access to certain government bonds for overseas investors.
India is also expected to allow overseas resident individuals to invest in listed shares through the portfolio investment route.
India Eyes Tax Relief for Global Bond Investors Amid Push for Capital Inflows
The government and the RBI are considering a series of measures aimed at attracting overseas capital into India's bond and equity markets
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India is considering a set of measures to attract more foreign investment, including tax relief for global bond investors and easier access to government securities, according to a Bloomberg report citing people familiar with the matter.
The proposals are expected to be taken up by the Union Cabinet as early as this week. The report added that that the government may significantly reduce taxes paid by foreign funds on Indian bonds and could even remove the current 20% tax on interest income earned from such investments.
The move comes as policymakers look to strengthen capital inflows and support the economy amid pressure on the rupee and rising global uncertainties.
Bond Market Reforms
According to the report, the Cabinet will consider options ranging from lowering the tax burden on foreign investors to eliminating the levy on bond interest income altogether.
Separately, the Reserve Bank of India (RBI) is expected to review access rules for certain long-term government securities. Some long-tenor sovereign bonds could be designated as fully accessible, allowing overseas investors to purchase them without investment limits.
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The central bank last revised the list of fully accessible government securities in 2024. Expanding the programme could help increase foreign participation in India's debt market and improve liquidity.
Push For More Overseas Capital
The government is also expected to notify rules allowing individual persons resident outside India (PROIs) to invest in shares of listed Indian companies through the portfolio investment scheme, Bloomberg reported.
The planned measures come as India seeks to attract more overseas investment amid pressure on its currency. Prime Minister Narendra Modi has also urged citizens to conserve foreign exchange, as the rupee remains under pressure from foreign fund outflows, higher oil prices and global trade and geopolitical uncertainties.
The currency touched a record low of 96.9650 against the US dollar on May 20 before recovering some ground following central bank support measures and easing oil prices. According to the report, the rupee is down more than 6% against the dollar this year, making it the second-worst performing currency in Asia. Authorities are exploring additional steps to strengthen foreign capital inflows and support financial markets.
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