Govt to bring Income-tax Amendment Bill to replace Ordinance on foreign investor tax relief

The government is set to introduce the Income-tax (Amendment) Bill, 2026 during the upcoming Monsoon Session of Parliament to replace the Income Tax (Amendment) Ordinance, 2026, which exempted foreign investors from paying income tax on interest income and capital gains earned from investments in government securities (G-secs).

The Ordinance, promulgated last month, was aimed at attracting foreign capital and easing pressure on the rupee, which has been under strain due to the West Asia crisis.

According to the list of new legislation scheduled for introduction, the Bill will be tabled during the Monsoon Session, which begins on July 20.

The Bill seeks to deepen India's sovereign debt market, attract stable global capital inflows, and enhance liquidity in view of the prevailing global macro-economic environment, marked by significant volatility arising from geopolitical uncertainties, sharp increases in crude oil prices, and disruptions in global supply chains, it said.

Foreign investors are subject to a long-term capital gains tax of 12.5 per cent on listed shares and bonds held for more than 12 months. They also pay a withholding tax of 20 per cent on interest earned on government bonds.

The ordinance, signed by President Droupadi Murmu, defines the BIS as the international financial institution established in 1930 and headquartered in Basel, Switzerland. It also refers to the existing statutory definitions of FIIs and government securities under Indian law.

The gazette notification had said the Ordinance was necessary as Parliament was not in session and immediate action was required, invoking the President's ordinance-making powers under Article 123 of the Constitution.

Besides, the government is set to present Demands for Excess Grants for the year 2022-23.

In addition, the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 will also be introduced in the House.

The Bill seeks to align the Micro, Small and Medium Enterprises Development Act, 2006 with changing MSME landscape, to enhance the Ease of Doing Business and bring trustbased regulations in the MSME ecosystem, to strengthen the mechanism for addressing delayed payments and provide for enforcement of arbitral awards for the MSEs, and to introduce flexibility and create enabling provisions for States to decide composition of Micro and Small Enterprises Facilitation Council (MSEFC).