India has unveiled a wide-ranging set of capital market reforms aimed at attracting more long-term foreign investment and strengthening its government bond and equity markets.
The Ministry of Finance said the changes are intended to make India a more attractive global investment destination and ensure steadier inflows of foreign capital into one of the world’s fastest-growing economies.
A key part of the reform expands access for overseas individual investors, allowing Persons Resident Outside India to invest directly in shares of listed Indian companies under the Portfolio Investment Scheme. Earlier, this route was mainly open to NRIs and OCIs.
The investment limit for individual overseas investors has been increased from 5% to 10% in a single company, while the combined limit for all such investors has been raised from 10% to 24%.
The government is also simplifying Foreign Portfolio Investor (FPI) rules for government securities. New 15-year, 30-year, and 40-year government bonds will now be fully accessible to global investors, along with certain Sovereign Green Bonds.
Several restrictions on FPI investment in government securities have been removed, including limits related to short-term holdings and concentration. However, overall investment caps remain unchanged at 6% for central government securities and 2% for state government securities.
To further encourage foreign participation, India will also merge existing investment categories into a single unified limit for government bond investments.
In a major tax incentive, FPIs will be exempt from income tax on interest and capital gains from government securities starting 1 April 2026. A similar exemption has been extended to the Bank for International Settlements.
Officials said the tax break is designed to improve returns for foreign investors and attract more stable, long-term capital, especially from institutions like pension funds and sovereign wealth funds.
The government believes these reforms will help deepen India’s bond market, improve the yield curve, boost foreign exchange inflows, and strengthen the rupee.
Overall, the package reflects India’s broader effort to open up its financial markets, reduce barriers for global investors, and position itself as a leading destination for international capital.