# India exempts FPIs from G-sec taxes, bond inflows jump sixfold to ₹39,640 crore in June > An ordinance removing withholding and capital-gains taxes on government securities retroactively from April 2025 triggered the biggest monthly FPI bond surge since index inclusion **Meta:** type: event · date: 2026-06-05 · heads: 누구의 돈인가, 조용한 변화 · 8 takes · 4 lenses · 1 regions ## Summary India's government promulgated an ordinance on June 5, 2026 amending the Income Tax Act to exempt foreign portfolio investors from both withholding tax on interest income (previously 20%) and long-term capital gains tax on government securities (previously 12.5%), retroactive from April 1, 2025. The measure was announced alongside the [RBI's June 5 MPC decision](/ko/n/rbi-rate-hold-june-2026) and the [RBI](/ko/entity/org/reserve-bank-of-india)'s currency-support package. The response was immediate: FPI government bond inflows in June surged to ₹39,640 crore, the highest monthly total since the JPMorgan GBI-EM phase-in, compared with ₹5,512 crore in May and ₹5,262 crore in April, a 6.3-6.6x jump. The single largest inflow day of 2026 was June 24 (₹8,109 crore net). FPI holdings in Fully Accessible Route (FAR) securities now stand at ₹3.58-3.75 lakh crore. The [RBI](/ko/entity/org/reserve-bank-of-india) also expanded the FAR universe to include all new 15-, 30- and 40-year G-sec issuances, adding roughly ₹1.5 trillion in upcoming supply available to foreign investors. The total debt limit for FPIs was raised to ₹16.32 lakh crore by October 2026. The tax move explicitly addresses one of the two conditions Bloomberg cited when it deferred India's inclusion in the Global Aggregate Index in January 2026 (addressed in [India completes two bond-index inclusions, Bloomberg Global Aggregate deferred](/ko/n/india-bond-index-journey-2026)). ## The split The Indian financial press treated the measure as an unambiguous positive, focusing on the inflow surge and 10Y yield decline. A subtler reading: the retroactive April 2025 effective date gives FPIs a tax refund on nine months of coupon income, a fiscal cost not prominently disclosed. The ordinance route, bypassing parliamentary procedure, reflects the government's urgency to arrest [rupee](/ko/entity/currency/indian-rupee) weakness and rebuild reserves; opposition voices who would normally flag the procedural shortcut were largely quiet. ## By the numbers - ₹39,640cr, FPI G-sec inflows in June 2026 (record monthly total) - ₹8,109cr, single-day inflow on June 24, 2026 (highest of 2026) - 6.3-6.6x, June inflow jump vs May - ₹5,512cr / ₹5,262cr, May / April 2026 FPI bond inflows (pre-exemption baseline) - ₹3.58-3.75 lakh crore, FPI holdings in FAR G-secs as of June 2026 - 20%, former withholding tax on FPI interest income (now zero) - 12.5%, former LTCG rate for FPIs on G-secs (now zero) - April 1, 2025, retroactive effective date of the exemption ## Why it matters Bond inflows are a direct counterweight to equity outflows ($17-18 billion in 2026) and to structural current-account pressure. The tax exemption transforms India's G-sec market competitiveness overnight, putting it structurally on par with Indonesia, Malaysia and South Africa in EM bond indices. The move also improves India's chances for Bloomberg Global Aggregate inclusion, which would unlock a further estimated $5-7 billion in passive inflows. ## What to watch - Bloomberg Index Services mid-2026 review of Global Aggregate inclusion, with tax clarity now provided - Whether the RBI expands the FAR list further (currently concentrated in 5-, 7-, 10-, 14-year benchmarks plus new long tenors) - Sustainability of ₹35,000+ crore monthly inflows: index-driven passive vs. active overlay demand - FPI limit utilisation: currently 3.34% of ₹112.42 lakh crore outstanding, well below the 6% ceiling ## Regional takes (batched by bias / lens) ### unlabelled - **Government of India / Ministry of Finance** (India, en) — DEA Monthly Economic Report (May 2026) providing the fiscal context: gross market borrowing for FY26-27 set at ₹14.82 lakh crore, fiscal deficit trajectory, and note of forthcoming FPI liberalisation measures. Source: https://dea.gov.in/files/monthly_economic_report_documents/MER%20May%202026.pdf - **News9Live** (India, en) — Source: https://www.news9live.com/business/biz-news/foreign-investors-pump-rs-35000-crore-in-indian-bonds-in-june-so-far-jumps-6x-2983030 - **Daily Pioneer** (India, en) — Source: https://dailypioneer.com/news/slug-lite/foreign-investors-pour-rs-35000-cr-in-indian-bonds?year=2026 - **UniVest** (India, en) — Source: https://univest.in/blogs/india-10-year-bond-yield-june-23-2026 - **Tribune India** (India, en) — Source: https://www.tribuneindia.com/news/business/rbi-retains-fpi-investment-caps-on-g-secs-sgss-corporate-bonds-total-debt-limit-raised-to-rs-16-32-lakh-crore/ ### independent Indian business press - **The Federal** (India, en) — Reports FPIs pumped ₹35,000 crore into Indian government bonds in the first three weeks of June alone, a 6.3-6.6x jump from May's ₹5,512 crore. Directly attributes the surge to the June 5 ordinance removing the 20% withholding tax on interest and 12.5% LTCG, retroactive from April 1, 2025. > "After the tax break, FPIs pumped Rs 35,000 crore into Indian bonds in June so far, jumping 6x over May." Source: https://thefederal.com/category/business/after-tax-break-fpis-pump-rs-35000-crore-into-indian-bonds-in-june-247793 ### Indian financial press / month-end tally - **Free Press Journal** (India, en) — Month-end tally puts total June FPI G-sec inflows at a record ₹39,640 crore, with the single highest day of 2026 (₹8,109 crore on June 24) included. Contextualises against April ₹5,262 crore and May ₹5,512 crore, and notes FPI holdings in FAR securities now at ₹3.58-3.75 lakh crore. > "Foreign investors pumped a record ₹39,640 crore into Indian government bonds in June, the highest monthly inflow since JPMorgan index inclusion." Source: https://www.freepressjournal.in/business/foreign-investors-pump-record-39640-crore-into-indian-govt-bonds-in-june ### retail-investor financial media - **Upstox** (India, en) — Explains the mechanics of the ordinance for a retail audience: previously FPIs paid 20% withholding on coupon income and 12.5% LTCG on bond sales; the exemption now places India on par with most EM markets and aligns with Bloomberg Global Aggregate requirements that led to the January 2026 deferral. > "India removed the 20% withholding tax on interest and 12.5% long-term capital gains for FPIs in government securities, effective retroactively from April 2025." Source: https://upstox.com/news/market-news/latest-updates/foreign-investors-pour-35-000-crore-in-indian-bonds-after-govt-tax-exemption-move/article-195880/ ## Across the graph - Related: [[india-bond-index-journey-2026]], [[india-rupee-rbi-fx-2026]], [[rbi-rate-hold-june-2026]] - Entities: Org:reserve Bank of India, Currency:indian Rupee, Person:narendra Modi --- Canonical: https://rbtfl.xyz/ko/n/india-fpi-bond-tax-exemption-2026