India Considers Major Tax Cut for Foreign Bond Investors Amid Rupee Pressure

The proposal, recommended by the Reserve Bank of India, is being seriously evaluated by the Finance Ministry, the report said, citing sources familiar with the matter. Authorities are reportedly examining the measure as part of a broader strategy to support the rupee and stabilize investor sentiment in the debt market.

The Reserve Bank of India did not immediately respond to requests for comment following the report.

The development came as the Indian rupee weakened sharply during Thursday's trading session, touching a record low of 95.9575 against the U.S. dollar before recovering slightly to trade at 95.7150. The currency's continued depreciation has intensified concerns over foreign capital outflows and external financial pressures.

Following the Bloomberg report, India's benchmark 10-year government bond yield declined by 2 basis points to 7.03%, indicating positive market sentiment toward the possibility of lower taxation for foreign bond investors and expectations of increased participation in the domestic debt market.

The potential tax reduction marks a significant policy shift as India seeks to strengthen its position in global financial markets, attract foreign investment into government securities, and address persistent pressure on the rupee amid volatile international economic conditions.