India Opens Wider Door for Foreign Investment in Markets

The Department of Economic Affairs will implement these changes through amendments to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019.

The Centre has unveiled a fresh set of reforms aimed at making India's capital markets more attractive to global investors. The measures, announced by the Ministry of Finance, are designed to simplify investment procedures, encourage long-term foreign capital and strengthen India's standing as a preferred investment destination. The key changes allow individual Persons Resident Outside India (PROIs) to invest directly in equity instruments of listed Indian companies through the Portfolio Investment Scheme. Until now, this route was available only to Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs).

The government has also increased the investment ceiling for an individual PROI from 5 per cent to 10 per cent in a company. The combined investment limit for all such investors has been raised from 10 per cent to 24 per cent. The Department of Economic Affairs will implement these changes through amendments to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. Officials believe the move will help attract a wider pool of international investors while making use of existing onboarding systems. Easier entry procedures and lower compliance requirements are expected to support more stable capital inflows into Indian equity markets.

Government Securities Market Gets Major Boost

The government has also introduced significant changes to the framework governing Foreign Portfolio Investor (FPI) participation in Government Securities (G-Secs). Under the revised rules, the Fully Accessible Route (FAR) will be expanded to include newly issued government securities with maturities of 15, 30 and 40 years. Sovereign Green Bonds issued within FAR-eligible maturities will also be included.

Several restrictions under the General Route have been removed. Limits related to short-term investments, concentration of holdings and security-wise investments will no longer apply to FPIs investing in government securities. The overall investment cap of 6 per cent of outstanding Central Government securities and 2 per cent of State Government Securities will remain unchanged.

The government has also decided to merge the existing "general" and "long-term" investment categories into a single investment limit structure. These changes are expected to improve liquidity in the bond market, support the development of a smoother yield curve and attract long-term institutional investors such as pension funds, insurance companies and sovereign wealth funds.

Tax Relief Aims to Attract Global Capital

In another major step, the government has exempted FPIs from paying income tax on interest income and capital gains arising from investments in Government Securities. The exemption will take effect from April 1, 2026, and will apply to all eligible income generated on or after that date. A similar tax exemption has also been extended to the Bank for International Settlements (BIS) on its investments in Government Securities.

The government believes that a competitive tax regime is essential for attracting global capital. By removing tax-related barriers and simplifying investment rules, India hopes to encourage larger and more predictable foreign investments into its financial markets. Taken together, the reforms are aimed at reducing operational hurdles, improving market accessibility and aligning India's investment ecosystem with leading global financial centres. The measures are expected to broaden participation in both equity and debt markets while reinforcing investor confidence in India's long-term growth story.