In line with the Government's commitment to strengthen India's position as a leading global investment destination and to deepen the capital market, the Ministry of Finance has taken a series of measures aimed at enhancing the ease of investment for individual Persons Resident Outside India (PROIs) and Foreign Portfolio Investors (FPIs), and to attract stable long-term foreign capital flows.

Building on the recent initiatives to enhance ease of doing business in capital markets, the Government has undertaken further reforms to make foreign investment in equities and G-Secs more accessible, efficient, and globally competitive.

Liberalisation of investment by individual Persons Resident Outside India under the Foreign Exchange Management (Non- Debt Instrument) Rules, 2019

The Union Minister for Finance and Corporate Affairs announced in the Union Budget FY 2026-27 that individual Persons Resident Outside India (PROI) will be permitted to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme which was hitherto available only to NRIs/OCIs; and the investment limit will be increased for an individual PROI under this scheme from 5% to 10% in any company, with an overall investment limit for all individual PROIs to 24%, from the current 10%.

To implement the same, Department of Economic Affairs (DEA) is notifying the Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2026.

This notification will facilitate a more proactive mobilisation of foreign portfolio capital by leveraging the existing onboarding systems already in place for NRI/OCI investors. Simplified onboarding and reduced compliance requirements would further enhance ease of doing business, while attracting a broader base of relatively stable individual foreign investors. This will also support greater and more stable foreign inflows into Indian equity markets.

Review of the regulatory framework for FPI investment in Government securities

With the view to enhance participation by FPIs in G-Sec, the Government has decided to expand the list of specified securities under the Fully Accessible Route (FAR) to also include new issuances in Government securities in tenors of 15, 30 and 40 years as also Sovereign Green Bonds (SGrBs) in the tenors of FAR-eligible securities. Further, with respect to FPI investments under General Route, it has been decided to remove the three restrictions, viz. short-term investment limit, concentration limit and the security-wise limit for investments by Foreign Portfolio Investors (FPIs) in Government securities, while retaining the overall quantitative investment limit of 6 per cent of the outstanding stock of the Central Government securities and 2 per cent of the State Government securities (SGSs). The sub-categories of investment limits, viz., 'general' and 'long-term' will also be merged into a single limit for investment in Government securities and SGSs, respectively.

These measures will help in development of a smooth yield curve, and attract stable systematic inflow of long-term, patient foreign capital, including long-term investors such as pension funds, insurance companies, and sovereign wealth funds. This is also expected to boost foreign exchange inflows for the country.

Exempt interest and capital gains on G-Secs from tax

Recognising the importance of a competitive tax regime in attracting global capital, the Government has decided to rationalise the tax treatment applicable to investments by FPIs in Government Securities, by exempting such investments from income tax on any interest or capital gain.  This step will align the taxation on G-Secs with many comparable jurisdictions.

The exemption shall be applicable w.e.f. 01.04.2026, i.e. the exemption shall apply to any interest or capital gains arising to FPIs on or after 01.04.2026 in respect of investments in G-Secs.

Similar income-tax exemption is also provided for Bank for International Settlements (BIS) for any interest or capital gains from its investments in G-Secs.

This will ensure stable systematic inflow of durable, patient foreign capital and long-term investors such as pension funds, insurance companies, and Sovereign wealth funds (SWFs).

Taken together, these reforms aim to reduce operational complexities, simplify market access, and provide a more seamless investment experience comparable with leading international financial markets. These measures are expected to expand the investor base for Indian equities and Government Securities and encourage wider participation from global investors seeking exposure to one of the world's fastest-growing major economies.

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Foreign investment liberalisation expands equity access, revises G-Sec investment rules, and exempts certain G-Sec income from tax. Foreign investment in Indian capital markets is being liberalised through measures intended to deepen the G-Sec market, expand access for individual Persons Resident Outside India and Foreign Portfolio Investors, and reduce operational and compliance frictions. Individual PROIs will be permitted to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme, with the individual investment cap raised from 5% to 10% in any company and the aggregate cap for all individual PROIs raised from 10% to 24%. The Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2026 are being notified to implement this framework.