India to drop capital gains tax for foreign investors in government bonds

📌 Summary:

• India plans to scrap capital gains tax on foreign portfolio investment (FPI) in government securities, which could boost such inflows
• The goal is to attract foreign capital to counteract pressure on the rupee, which has weakened more than 5% since the start of 2026
• The currency pressure has been driven by higher oil prices and foreign portfolio outflows from equities

🎯 UPSC Relevance: GS3 economy — using taxation policy to attract FPI, currency stability and external-sector management.

📝 Prelims Facts:

• Capital gains tax to be dropped on FPI in government bonds (G-secs)
• Rupee down more than 5% in 2026 amid high oil prices and equity FPI outflows

🔑 Key Term: Foreign Portfolio Investment (FPI) — investment in financial assets such as stocks and bonds without control over the issuer; relatively easily reversible ("hot money").