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Govt Scraps Capital Gains Tax on FII Bonds, RBI Revives FCNR(B) Scheme to Attract $70 Billion Foreign Funds

EconomyPolityHIGH
Target:UPSC GS-IIIMPSCBankingSSC GATeachingPrelims HighMains MediumStatic GK Link
06 Jun 2026
~2 min
Source: Indian Express
Key Data:$70 billion7.8% GDP growth Q4 FY267.7% GDP growth FY26$20-25 billion bond inflows$26 billion FCNR(B) 2013
Bodies:EAC-PMRBIMinistry of FinanceBloomberg Index Services Ltd (BISL)India Meteorological Department
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What This Article Covers

1.The Finance Ministry removed short-term & long-term capital gains tax and withholding tax on FII investments in government bonds.

2.RBI introduced measures like a concessional forex swap for PSU ECBs and revived the 2013 FCNR(B) deposit scheme.

3.These moves are expected to accelerate inclusion in the Bloomberg Global Aggregate Bond Index, potentially attracting $20-25 billion in 10 months.

The Big Picture
Prelims · HighMains · Medium

The government and RBI announced major tax and regulatory relaxations to attract foreign capital, potentially bringing in $70 billion. Key measures include abolishing capital gains tax on FII investments in government bonds and reviving the FCNR(B) deposit scheme. This aims to secure India's inclusion in global bond indices and boost forex reserves.

Exam Lens

Quick Exam Facts From News

Estimated Foreign Inflows$70 billion
Potential Bond Index Inflows$20-25 billion over 10 months
Q4 FY26 GDP Growth7.8%
Full-Year FY26 GDP Growth7.7%
FCNR(B) Scheme 2013 Inflows$26 billion

1-Minute Revision

  • ›Estimated Foreign Inflows: $70 billion
  • ›Potential Bond Index Inflows: $20-25 billion over 10 months
  • ›Target this Data: $70 billion (total potential inflow), $20-25 billion (from bond index inclusion), 7.7% (FY26 GDP growth).
  • ›Target this Nodal Body: Economic Advisory Council to the PM (EAC-PM), chaired by the Prime Minister.
  • ›Target this Scheme: Foreign Currency Non-Resident (Bank) Deposits scheme (FCNR(B)) revived from 2013.

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Practice exam-style questions, track your score, and strengthen your recall.

Q1Static LinkageEasy

Who chairs the Economic Advisory Council to the Prime Minister (EAC-PM)?

Q2Statement-basedHard

Consider the following statements regarding the measures announced:

1. The Ministry of Finance abolished the withholding tax on interest income for FIIs from government bonds.

2. The Reserve Bank of India introduced a permanent concessional forex swap facility for all corporates for External Commercial Borrowings.

3. The revival of the FCNR(B) scheme involves the central bank bearing the full exchange rate hedging cost.

Which of the statements given above is/are correct?

Q3Data-centricMedium

According to the provisional estimates mentioned in the article, what was India's GDP growth rate for the full financial year 2025-26?

Q4Application/ImpactMedium

What is the primary economic objective behind the government's move to scrap taxes on FII investments in government bonds?

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