India plans to simplify registration and compliance requirements for foreign portfolio investors (FPIs) after exempting them from paying taxes on interest income and capital gains from specified government securities (G-Secs), sources said.
“There is an ask to ease some of the KYC (know your customer) norms for FPIs, as they face difficulties in carrying out portfolio transactions. SEBI regulates these KYC norms. One key ask is to accept only digital forms for verifying FPIs in India, which is not the case at present. The current rules require physical copies to be submitted as well to SEBI; only then can investors undertake transactions,” a person said, requesting anonymity.
SEBI is also considering easing disclosure norms for FPIs. The aim is to reduce the compliance burden on FPIs even if they own more than 50 percent of their Indian equity assets in a single corporate group, the official said.
Under SEBI’s Granular Look-Through Rule, introduced in 2023, an FPI with more than 50 per cent of its total Indian equity assets invested in companies belonging to a single corporate group must disclose every entity or natural person holding any economic interest, ownership, or control in the fund. Funds have 10 trading days to cut their exposure below the threshold or stop making fresh purchases, and 30 trading days to submit ownership details.
“We have reduced tax issues for certain segments; steps have been taken on rupee-dollar stability. For ease of doing business, KYC is one area where the government is looking to make registration easier. That is a work in progress,” a second person said, also requesting anonymity.
The proposed changes build on a series of recent measures to attract long-term foreign capital into India.
Spokespersons for the finance ministry and Sebi did not immediately respond to requests for comment.
In June, the government announced an income-tax exemption for FPIs on interest income and capital gains from investments in Government Securities, effective retrospectively from April 1, 2026.
The Reserve Bank of India simultaneously expanded the Fully Accessible Route (FAR) to include all new issuances of 15-year, 30-year and 40-year Government Securities, removed several investment restrictions under the general route, and simplified investment limits to encourage greater overseas participation in the debt market.
According to media reports, SEBI is currently working to reduce the onboarding time for FPIs to as little as five days through end-to-end digitisation, wider adoption of digital documentation and closer coordination with other regulators to streamline the registration process.
The latest push to ease doing business also comes amid volatile foreign portfolio flows.
According to official data, FPIs recorded net outflows of $7.6 billion in April 2026 and $3.1 billion in May 2026, reflecting a global risk-off environment amid geopolitical tensions in West Asia and higher oil price risks.
Preliminary trends, however, pointed to an improvement in June.
While equity markets continued to see net outflows of $1.8 billion, these were partly offset by $3.6 billion of FPI investments in Government Securities through the FAR and General Route, supported by improving market sentiment and recent policy measures.
