Foreign investors must file a new form to claim tax exemption on government bonds
Investors claiming tax exemption on interest and capital gains from Indian government securities must now furnish a new Form 173A.
- Document
- Update
- Dated
- 27 Oct 2026
- Effective
- Date of publication in the Official Gazette (Rule 1(2)). The notification date is garbled in the text and the form numbe
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Investors claiming the government securities exemption must submit the new Form 173A.
- The form asks for PAN, SEBI registration and details of each security held.
- It covers interest received and capital gains earned during the tax year.
- The document states no filing deadline.
- The rules apply from publication in the Official Gazette, a date not given here.
In short
The Central Board of Direct Taxes (CBDT), India's tax policy body, has issued the Income-tax (Seventh Amendment) Rules, 2026. It adds a new rule 281A and a new Form 173A, which are used to claim tax exemption on interest and capital gains from government securities under Schedule IV of the Income-tax Act, 2025. The title calls these rules proposed, but the operative text reads as final, and the notification's day is garbled in the copy we have.
What has changed
How it worked before
The Income-tax Rules, 2026 had no rule 281A and no Form 173A before this amendment. The document does not describe any earlier filing requirement for this exemption.
What has changed
Claiming the exemption under Schedule IV (entries 13D and 13E) now requires furnishing information in Form 173A. The form asks for basic details, PAN, tax identification number, SEBI registration, and security-wise figures for interest and capital gains.
Who this affects
Foreign portfolio investors (FPIs), foreign institutional investors (FIIs) and the Bank for International Settlements (BIS) who hold Indian government securities and want the tax exemption on the interest or gains from them. The document says the TIN and SEBI details are optional for BIS.
An example
A Singapore-based fund registered with SEBI as an FPI holds Treasury Bills and a fixed rate government bond. To claim the exemption on the interest and gains, it must fill in its name, address, PAN, tax identification number and SEBI registration. It must also list each bond by its ISIN with its value on 1 April and 31 March, the amounts bought and sold, and the interest and capital gains for the year.
What you should do
If you claim this exemption, prepare the Form 173A details: name, address, PAN, tax identification number, SEBI registration, and the ISIN, type, tenor and values of each security. Check with your tax adviser how and when to submit it, since the document does not say.
If you do nothing
The rule ties the exemption to furnishing this information, so the exemption may not be available without it. The document does not state any penalty or interest for not filing the form.
The terms explained
- Government securities (G-secs)
- Bonds and bills issued by the Indian government to borrow money. Examples in the form include Treasury Bills and State Development Loans.
- Foreign portfolio investor (FPI)
- A non-Indian investor who buys Indian shares, bonds or other securities and is registered with SEBI, India's securities market regulator.
- Schedule IV
- A list in the Income-tax Act, 2025 that sets out income which is exempt from tax.
- Assessee
- The person or company that is liable to pay tax and files the tax return. In this document it means the investor claiming the exemption.
- ISIN
- International Securities Identification Number, a unique code that identifies one specific security, such as one bond.
The original document
| Issued by | IT |
|---|---|
| Document | Update |
| Full title | CBDT has proposed the Income-tax (Seventh Amendment) Rules, 2026, introducing Rule 281A and new Form 173A for furnishing information to claim exemption on interest income and capital gains from Government securities under Schedule IV of the Income-tax Act, 2025. |
| Issued on | 27 October 2026 |
| Effective | Date of publication in the Official Gazette (Rule 1(2)). The notification date is garbled in the text and the form numbe |
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