Government notifies exemption for FIIs on interest on Government Securities [Read Notification]

The Ministry of Law and Justice (Legislative Department) has recently issued a notification on June 5, 2026, regarding the Income-tax (Amendment) Ordinance, 2026.

The Ministry of Law and Justice has issued the Income-tax (Amendment) Ordinance, 2026 on June 5, 2026. Since Parliament is currently not in session, the President promulgated the ordinance under Article 123 of the Constitution. The amendment will be considered effective from April 1, 2026.

The ordinance amends Schedule IV of the Income-tax Act, 2025 and introduces new tax exemptions for two categories of investors. The amendment inserts new entries 13D and 13E, granting exemption from income tax on interest earned from Government securities and on capital gains arising from their sale, exchange, or transfer to Foreign Institutional Investors (FIIs) and the Bank for International Settlements (BIS), subject to furnishing prescribed information.

The ordinance also inserts Note 4, defining the Bank for International Settlements as an international, established at the Hague Conference in 1930 and headquartered in Basel, Switzerland. The term “Foreign Institutional Investor” will have the meaning assigned under the Income-tax Act, while “Government security” will carry the same meaning as provided under the Government Securities Act, 2006.