India weighs tax cuts to attract foreign bond investors

India is evaluating a range of steps to lure more foreign investment, such as lowering taxes on bond earnings for global funds and widening overseas access to government bonds. | Photo Credit:
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India is preparing to unveil measures this week to attract more foreign investment by cutting taxes and lifting ownership caps on certain bonds, according to sources familiar with the plan.

Officials said the cabinet, meeting on Wednesday, will look at a substantial reduction in the tax that global funds pay on Indian government bonds. Sources, who asked to stay anonymous because the details are confidential, added that the cabinet may also discuss scrapping the 20% interest levy on bond holdings or trimming it to a minimal level.

Separately, the Reserve Bank of India is expected to classify certain long‑term sovereign securities as fully open to foreign buyers, letting them purchase without any ceiling. The last adjustment to the list of eligible government securities under this arrangement occurred in 2024, when the central bank dropped the 14‑year and 30‑year bonds.

Requests for comment went unanswered by the Finance Ministry and the Reserve Bank of India. Bloomberg News reported last month that India is weighing these tax reductions after a suggestion from the central bank.

Steps to bolster the rupee against external pressures

The rupee’s decline to historic lows has pushed officials to intensify actions to halt its fall, with Prime Minister Narendra Modi urging citizens to save foreign currency as oil import bills rise. The currency has suffered from a mix of issues, including US trade tariffs, record outflows of foreign capital, and the oil price shock stemming from the Iran conflict, all of which have strained India’s finances.

The rupee touched an all‑time low of 96.9650 on May 20, but has since recovered after the central bank increased support and oil prices softened following renewed US‑Iran diplomatic talks. It remains the second‑worst performing Asian currency this year, down more than 6% against the dollar.

On Wednesday the currency slipped 0.5% to 95.71 per dollar, while the 10‑year yield edged up one basis point to 7.02%.

Government may broaden foreign investor access

Authorities are also set to announce a plan that would let individuals residing outside India (known as PROIs) purchase shares of listed Indian firms via the portfolio investment scheme, according to the sources.

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Published on June 4, 2026