Unlike Foreign Portfolio Investors (FPIs), Non-Resident Indians (NRIs) will be required to pay income tax on capital gains or interest from Government Securities (G-Secs) if they invest on a standalone basis, government officials said. The rate will be based on provisions under the Double Taxation Avoidance Agreements (DTAA) with the country concerned.“Not standalone, but NRI can invest as a part of the FPI (Foreign Portfolio Investor),” a senior government official told businessline, clarifying whether the May 5 ordinance will cover NRIs as well. Based on the recommendations of the Union Cabinet, President Droupadi Murmu promulgated an ordinance 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 gains.The exemption shall be applicable with effect from April 1, 2026, i.e. the exemption shall apply to any interest or capital gains arising to FPIs on or after April 1, 2026, in respect of investments in G-Secs. Similar income-tax exemption is also provided for the Bank for International Settlements (BIS) for any interest or capital gains from its investments in G-Secs.According to Sandeep Sehgal, Partner-Tax at AKM Global, taxation for NRIs has not undergone any change, hence they will be subject to the same tax rate. In other words, interest on G-Secs shall be taxed at 20 per cent (except 5 per cent on certain notified G-Secs/rupee bonds) subject to any lower tax rate provided under the tax treaty. Similarly, the long-term capital gains (LTCG) shall be taxed at 12.5 per cent and short-term capital gains (STCG) shall be taxed at 20 per cent subject to any treaty relief. “The recent ordinance removing these taxes is targeted squarely at foreign portfolio investors and the BIS, and does not, by itself, extend a similar blanket exemption to retail NRI investors in G-Secs,” he said.Amarjeet Singh Arora, Partner (Financial Services, Tax & Regulatory Advisory) at BDO India, said NRIs will continue to be governed by other provisions under the Income Tax Act. “The Government’s immediate focus appears to attract institutional portfolio flows rather than retail or individual overseas investors; there may be some case for extending similar benefits to NRIs, who are equally contributing foreign capital to India. Accordingly, industry bodies may seek extension of the exemption to NRIs as well,” he said.Until such relief is specifically provided, NRIs may need to explore available tax treaty benefits under applicable tax treaties or consider investing through eligible investment vehicles, subject to commercial and regulatory feasibility, Arora suggested.Experts also suggested a list of instruments through which NRIs can invest for tax exemption. According to Nehal Sampat, Partner at Price Waterhouse & Co LLP, SEBI had already relaxed caps with respect to NRI investors for FPIs that are investing solely in Government securities. These FPIs can have, for example, NRI investors only. “NRIs can benefit from tax exemption announced for interest and capital gains from Government securities for FPIs by investing in offshore funds and GIFT IFSC Funds registered as FPIs,” he said.Published on June 7, 2026