Finance Minister Clarifies Tax Treatment for Foreign Portfolio Investors in India
Foreign Portfolio Investors (FPIs) have been under scrutiny in the Lok Sabha regarding preferential tax treatment. Members of Parliament raised concerns that FPIs were exempt from long-term capital…
Foreign Portfolio Investors (FPIs) have been under scrutiny in the Lok Sabha regarding preferential tax treatment.
Members of Parliament raised concerns that FPIs were exempt from long-term capital gains (LTCG) tax, while domestic and retail investors continued to pay 12.5%.
The Minister of Finance clarified that FPIs have not been exempted from LTCG tax on equity investments, contrary to speculation.
According to the Minister of State for Finance, Pankaj Chaudhary, the tax rate of 12.5% on LTCG for domestic and retail investors is the same for FPIs for investments in equity.
However, the recent amendment applies only to Government Securities (G-Secs) and not to equity investments.
The exemption for FPIs in G-Secs took effect from 1 April 2026, exempting interest income and capital gains from Indian income tax.
The Minister explained that the amendment was introduced to make India's tax framework more competitive and attract global capital.
The government aims to encourage long-term foreign participation in India's debt market by attracting stable institutional investors.
This targeted measure is intended to ensure stable systematic inflow of durable, patient foreign capital and long-term investors.
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