India doubles foreign investor equity cap and tax‑exempts G‑Sec gains

India’s Finance Ministry announced a sweeping reform of foreign investment rules. Individual Persons Resident Outside India (PROIs) can now invest up to 10% of a listed company's equity, double the previous 5% limit, and the aggregate ceiling for all PROIs rises from 10% to 24%. The changes are implemented via the Foreign Exchange Management (Non‑Debt Instruments) (Third Amendment) Rules, 2026.

In the debt market, the Fully Accessible Route for government securities is expanded to include new 15‑, 30‑ and 40‑year issuances and sovereign green bonds. Three existing restrictions on Foreign Portfolio Investor (FPI) holdings—short‑term limit, concentration limit and security‑wise limit—are removed, while the overall cap of 6% of central government securities remains. Effective 1 April 2026, interest and capital‑gain income from FPI holdings in government securities will be exempt from income tax.

The reforms aim to attract a broader base of stable, long‑term foreign capital such as sovereign wealth funds, pension funds and insurance companies, and to position India as a more competitive destination for global investment.