Revised Common Application Form for Foreign Portfolio Investors (FPIs) Now Officially Announced

The government has recently introduced a revised common application form designed for foreign portfolio investors (FPIs) seeking to register in India. This amendment, announced by the Department of Economic Affairs (DEA), aims to simplify investment processes by modifying declaration requirements, thereby enhancing the appeal of India’s debt market to international capital. Notably, a new category for investors focused exclusively on government securities has been established, which reflects a strategic effort to attract specific types of FPI investments while still retaining most existing requirements.

This regulatory change follows a series of governmental measures to stimulate foreign capital inflows, particularly after the recent depreciation of the Indian rupee. Notably, FPIs have been granted exemptions from imposing capital gains and withholding taxes on government securities. This includes the removal of a 12.5% long-term capital gains tax and a 20% withholding tax associated with interest earnings on these securities. The governmental shift towards a more investor-friendly tax regime recognizes the importance of fostering a vibrant foreign investment landscape, especially in response to changing global capital dynamics.

The expansion of the investable asset pool for FPIs, with the inclusion of long-dated government securities (tenors of 15, 30, and 40 years) along with sovereign green bonds, further indicates India’s commitment to accommodating foreign investments. Previously, the accessibility to such securities was limited to tenors of up to 10 years. This broadening of the investment horizon is anticipated to not only enhance liquidity in the market but also encourage FPIs to diversify their portfolios within India’s evolving fixed-income environment.