The Central Board of Direct Taxes (CBDT) has notified a new form, Form 173A, for foreign investors to claim income tax relief on interest and capital gains earned from government securities. This form is part of the Income-tax Rules, 2026, and aims to simplify the process for eligible investors to avail tax exemptions on their investments.
- Form 173A is required for claiming exemption on income from government securities.
- The form collects detailed investor information, including identification and investment details.
- The exemption applies from April 1, 2026, to attract long-term foreign capital.
- Only entities covered under Schedule IV of the Income-tax Act, 2025, need to file this form.
What is Form 173A and who must file it?
Form 173A is a declaration form notified by the CBDT for foreign investors to claim income tax exemption on interest and capital gains from government securities. It is mandatory for entities eligible under Schedule IV of the Income-tax Act, 2025, to submit this form to avail the tax relief. Individual investors do not need to file this form solely because they invest in government securities.
What information does Form 173A require?
The form requires investors to provide comprehensive details, including:
- Full name and country of residence
- Address in the country of residence or headquarters, including detailed location information
- Permanent Account Number (PAN) and Tax Identification Number (TIN) in the country of residence
- SEBI registration number as Foreign Portfolio Investor (FPI) or Foreign Institutional Investor (FII)
- Tax year for which exemption is claimed
- Email ID and contact number with country code
- Details of government securities held, such as International Securities Identification Number (ISIN), type, tenor, and values at the start and end of the year
- Gross interest received or accrued and capital gains earned during the tax year
Which government securities are covered under this exemption?
The exemption applies to various types of government securities, including Treasury Bills, fixed-rate bonds, floating-rate bonds, State Development Loans (SDLs), and other specified securities. Investors must report transactions and holdings related to these securities in Form 173A.
When did the new rules come into effect?
The Income-tax (Seventh Amendment) Rules, 2026, which include the insertion of Rule 281A and Form 173A, were notified on October 19, 2026, and came into force on the same date. The income tax exemption on eligible interest and capital gains from government securities is effective from April 1, 2026.
Why has the government introduced this exemption and form?
The government introduced this exemption to attract stable, long-term foreign capital into the country by making investments in government securities more attractive through tax relief. Form 173A ensures that only eligible investors claim this benefit by requiring detailed disclosures and declarations.
What declaration must investors make on Form 173A?
Investors must declare that the information provided in the form is true to the best of their knowledge and belief. They must also confirm compliance with Schedule IV, Table Sl. Nos. 13D and 13E of the Income-tax Act, 2025. All amounts must be reported in Indian rupees unless otherwise specified.
Frequently Asked Questions
Q: Do individual investors need to file Form 173A?
A: No, individual investors do not need to file Form 173A simply because they invest in government securities. The form is required only for entities covered under the specific exemptions in Schedule IV of the Income-tax Act, 2025.
Q: What is the purpose of the tax exemption on government securities?
A: The exemption aims to attract stable, long-term foreign capital by removing income tax on eligible interest and capital gains from government securities.
Q: When did the new Income-tax Rules come into effect?
A: The Income-tax (Seventh Amendment) Rules, 2026, including Form 173A, were notified and came into force on October 19, 2026, with the exemption effective from April 1, 2026.
