India will take more steps to spur foreign capital inflows, not stopping with the recent announcements made by the government and the Reserve Bank of India, Finance Minister Nirmala Sitharaman said on Monday. “We will be doing more. We recognise we need more foreign capital to come in,” she said at the Hero Mind Mine Summit here.

On June 5, the government and RBI launched a coordinated, multi-pronged package to combat persistent Foreign Portfolio Investor (FPI) sell-offs, ease balance-of-payments (BoP) pressures, and stabilise the rupee.

Through an Ordinance, the government scrapped 20% withholding tax on interest income on government bonds and the 12.5% long-term capital gains (LTCG) tax on foreign bond holdings

“The withholding tax treatment which we have offered, we think will be the first step towards drawing some capital back, although we have at the moment confined it only to the bond market. But certainly that is not the end of the story,” Sitharaman said, hinting at measures aimed at boosting foreign investments in Indian equities as well.

FE reported earlier that the government internally discussed more than a dozen proposals to curb capital flight and address relatively low net FDI inflows, including a reduction in the long-term capital gains tax (LTCG) on equities.

Additionally, to curb capital outflows, the government is also believed to be considering reducing the annual Liberalised Remittance Scheme (LRS) limit from the current $250,000 per individual. The limit could be temporarily halved, sources had said.

Under the RBI’s LRS, resident Indians remitted $28.98 billion in foreign exchange for education, travel, investments and property purchases in FY26. However, analysts contend that, given the typically lower annual usage by Indians, the move may not result in significant forex savings.

Proposals under discussion also included additional curbs on gold imports and measures to increase domestic gold utilisation.

Before announcing tax waiver for capital gains and interest income from G-secs for foreign portfolio investors, FPIs were subject to a short-term capital gains tax of 30% on G-secs and a long-term capital gains tax of 12.5% for holding periods of more than 12 months. FPIs’ interest income was subject to 20% tax.

The exemption on their income and capital gains applies to any interest or capital gains arising to FPIs on or after April 1, 2026, in respect of investments in G-Secs. A 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.

These moves are aimed at ensuring stable systematic inflow of durable, patient foreign capital and long-term investors such as pension funds, insurance companies, and Sovereign wealth funds (SWFs), the government had said.

To encourage greater participation by FPIs in government securities, the government also expanded the Fully Accessible Route (FAR) to include new issuances of 15-, 30- and 40-year Government Securities, as well as Sovereign Green Bonds in eligible tenors.

Under the General Route, restrictions relating to short-term investments, concentration limits and security-wise limits were removed, while overall investment caps remain unchanged at 6% of outstanding central government securities and 2% of State Government Securities. The reforms aim to develop a smoother yield curve, attract long-term foreign investors such as pension and sovereign wealth funds, and support foreign exchange inflows.