New Delhi:Foreign investors have pulled out $27.6 billion from Indian equities since January. On most trading days, the impact of this continuous outflow outweighs the support provided by domestic investors.

Hence, the Centre's decision to exempt foreign investors from taxes on interest income and capital gains earned from government securities is being viewed by market experts as a significant step towards making India's debt market more attractive to global capital.

The move comes at a time when India is trying to deepen its bond market, expand its investor base and strengthen its position in global fixed-income portfolios. According to Ajay Kumar Yadav, CFP CM, Group CEO and CIO at Wise FinServ, the tax relief could improve India's appeal among international investors by enhancing the returns they ultimately take home.

"For any foreign investor, the key metric is not just the bond yield but the post-tax return," Ajay Kumar Yadav said. "Even if government securities offer attractive yields, taxes on interest income or capital gains reduce the final return. Removing that burden makes Indian bonds more competitive."

Why The Move MattersGlobal investors typically assess countries on several parameters, including yields, tax treatment, liquidity, currency risk, policy stability and ease of exit.

By eliminating taxes on income and gains from government securities, India has improved one of the most important variables in that equation.

Source:Ndtv