Archive · 21 Jul 2026
FPIs Clarified: 12.5% LTCG Tax on Equity Same for All
The Indian government has clarified that Foreign Portfolio Investors (FPIs) are not exempt from the 12.5% long-term capital gains (LTCG) tax on equity investments.
This tax rate is the same for both domestic and FPIs.
The recent amendment through the Income-tax (Amendment) Ordinance, 2026, only applies to Government Securities (G-Secs), exempting FPIs from income tax on interest and capital gains from these investments.
This exemption aims to make India's tax framework more competitive and attract global capital, encouraging long-term foreign participation in India's debt market.
FPIs are not exempt from the 12.5% LTCG tax on equity investments; it is the same for domestic investors.
The recent tax amendment applies only to Government Securities (G-Secs), exempting FPIs from income tax on interest and capital gains.
The exemption for FPIs on G-Secs took effect from 1 April 2026.
The government aims to attract long-term foreign investment in India's debt market through this exemption.
The clarification was made in response to concerns over preferential tax treatment for FPIs.
- Who
- Union Minister of State for Finance Pankaj Chaudhary
- What
- Clarification on LTCG tax for FPIs and domestic investors
- When
- 20 July
- Where
- Lok Sabha
- Why
- To address concerns over preferential tax treatment for FPIs and to attract long-term foreign investment in India's debt market
Domestic Investors
Foreign Portfolio Investors
Tax Treatment on Equity Investments
Domestic Investors
Domestic investors pay a 12.5% LTCG tax on equity investments.
Foreign Portfolio Investors
FPIs also pay a 12.5% LTCG tax on equity investments, same as domestic investors.
Tax Treatment on Government Securities
Domestic Investors
Domestic investors do not receive tax exemptions on G-Secs.
Foreign Portfolio Investors
FPIs receive tax exemptions on interest income and capital gains from G-Secs.
- Tax Rate on LTCG for Equity
- 12.5% for both domestic and FPIs
- Tax Exemption for FPIs
- Applies only to Government Securities (G-Secs)
- Effective Date of Exemption
- 1 April 2026
- Objective of Exemption
- To attract long-term foreign investment in India's debt market
- Government's Goal
- To ensure stable inflow of durable, patient foreign capital