FPI inflows into FAR securities rise by Rs 8,795 cr after govt tax exemption

Foreign portfolio investors (FPIs) have invested Rs 8,794.743 crore in Government securities under the Fully Accessible Route (FAR) after the Government exempted them from income tax on interest income and capital gains arising from investments in these bonds.

According to data from the Clearing Corporation of India Ltd (CCIL), FPI holdings in FAR securities stood at Rs 3.32 lakh crore on Tuesday, up from Rs 3.23 lakh crore on June 3.

FAR allows non-resident investors to invest in specified Government of India dated securities without any investment ceilings.

“We can see the optimism from FPIs who nearly invested 75 per cent of the net purchase in G-secs under FAR category recorded during April & May. It also strengthens India’s case for inclusion in major global bond indices, such as Bloomberg’s sovereign bond index, whose inclusion decision was deferred earlier this year,” said Mataprasad Pandey, vice-president at Arete Capital.

The government, on June 5, promulgated an ordinance amending the Income Tax Act to provide tax exemption on interest income and capital gains arising from the sale, exchange or transfer of government securities held by FPIs. The exemption is applicable retrospectively from April 1, 2025.