Form 173A: CBDT Notifies Form for FII G-Sec Tax Exemption
October 20, 2026 · International Tax and Transfer Pricing
Form 173A, notified on October 19, 2026, is required for FIIs and the BIS to claim exemption on Government securities interest and gains.
CBDT has notified Form 173A through Notification No. 137/2026 dated October 19, 2026 (G.S.R. 901(E)). Foreign Institutional Investors (FIIs) and the Bank for International Settlements (BIS) must now furnish Form 173A to claim exemption on interest and capital gains from Government securities under Schedule IV (Table: Sl. Nos. 13D and 13E) of the Income-tax Act, 2025. The rules came into force on publication in the Official Gazette on October 19, 2026, while the exemption itself applies from April 1, 2026.
The change matters to FIIs holding Government securities (including SEBI-registered foreign portfolio investors, which the Central Government has notified as FIIs), their custodians and tax representatives, and the BIS. The position below is stated as of October 20, 2026.
What has changed: Form 173A and Rule 281A
The Income-tax (Seventh Amendment) Rules, 2026 are made under section 533 read with section 11 and Schedule IV of the Income-tax Act, 2025. They insert Rule 281A in the Income-tax Rules, 2026. Rule 281A states that, for claiming exemption under Schedule IV (Table: Sl. Nos. 13D and 13E), "the assessee shall be required to furnish information in Form No. 173A".
The rules also insert Form No. 173A after Form 173. Its title is "Information to be furnished for claiming exemption on interest and capital gains from Government securities". The form ends with a declaration signed by the principal officer, confirming that the information is in accordance with Sl. Nos. 13D and 13E.
The underlying exemption in Schedule IV
Sl. No. 13D exempts "any interest on Government security, and any capital gains arising from the sale, exchange or transfer of such Government security" in the hands of a Foreign Institutional Investor. Sl. No. 13E gives the same exemption to the Bank for International Settlements. In both cases, the exemption "shall be subject to furnishing of information in such form and manner, as may be prescribed".
These entries were first inserted by the Income-tax (Amendment) Ordinance, 2026 (No. 2 of 2026) dated June 5, 2026, deemed to be in force from April 1, 2026. The Taxation and Other Laws (Amendment) Act, 2026 (No. 21 of 2026), published on August 17, 2026, inserted the same entries with effect from April 1, 2026 and repealed the Ordinance, with a saving clause.
Key definitions under Note 4 to Schedule IV
Foreign Institutional Investor: has the meaning assigned in section 210(6)(a) of the Income-tax Act, 2025, that is, an investor specified in a notification by the Central Government. Section 210 deals with tax on income of FIIs from securities and capital gains on their transfer, the subject earlier covered by section 115AD of the Income-tax Act, 1961.
Government security: has the meaning in section 2(f) of the Government Securities Act, 2006.
Bank for International Settlements: the BIS established at the Hague Conference in 1930 and headquartered at Basel, Switzerland.
Schedule IV operates through section 11 of the Income-tax Act, 2025. Under section 11(1), income enumerated in Schedules II to VI is not included in total income, subject to the conditions specified in those Schedules. Under section 11(2), the income is taxable for any tax year in which those conditions are not satisfied. Schedule IV itself lists income not to be included in the total income of eligible non-residents, foreign companies and other such persons.
Section 11 broadly corresponds to section 10 of the Income-tax Act, 1961. Under the Income-tax Act, 1961, FII income from Government securities was taxed under section 115AD.
According to the Finance Ministry's FAQs on the exemption, interest on certain Government securities was exempt under section 10(15) until 2002, and a concessional rate applied under section 115AD read with section 194LD for specified periods between 2013 and 2023. Immediately before April 1, 2026, FIIs had no exemption for this income in the terms of Sl. Nos. 13D and 13E.
Key dates and changes
Category
Earlier position
Revised position
Effective from
FII: Government security interest and capital gains (Sl. No. 13D)
No entry in Schedule IV
Not included in total income, subject to furnishing information
April 1, 2026
BIS: Government security interest and capital gains (Sl. No. 13E)
No entry in Schedule IV
Not included in total income, subject to furnishing information
April 1, 2026
Form for the information
"As may be prescribed", not yet notified
Rule 281A and Form No. 173A (Notification No. 137/2026)
October 19, 2026
TIN and SEBI registration fields in Form 173A
Not applicable
Optional for BIS only (Note 4 to the form)
October 19, 2026
What Form 173A asks for
Part A: basic information
Part A covers the name in full, country of residence, address in the country of residence or headquarters, PAN, Tax Identification Number (TIN) in the country of residence and SEBI registration number as FPI/FII. It also asks for the tax year for which the exemption is claimed, an email ID and a contact number with country code.
Part B: security-wise details of exempt income
Part B is completed, and repeated as needed, for each security. Amounts are in rupees unless otherwise provided.
ISIN and type of Government security: Treasury Bills, Fixed Rate bonds, Floating Rate bonds, State Development Loans (SDLs) or others (to be specified);
tenor of the security;
total value of securities as on 1st April and as on 31st March;
value of securities purchased and sale consideration of securities sold during the year;
gross amount of interest received or accrued, and capital gains earned, during the tax year.
Practical impact of Form 173A
For Foreign Institutional Investors and FPIs
The exemption is conditional. An FII claiming the exemption for tax year 2026-27 should be ready to furnish Form 173A for that year. Security-wise records of holdings, purchases, sales, interest and gains should tie back to custodian statements.
Rule 281A and Form No. 173A do not specify a due date, the income-tax authority to whom the form is furnished, or the mode of furnishing it. As of October 20, 2026, investors should check the income-tax e-filing portal for any filing utility or further CBDT instructions before furnishing the form.
For custodians, tax representatives and payers
Custodians and tax representatives may need to compile Part B data from transaction records. Notification No. 137/2026 deals only with the information required to claim the exemption. Neither the notification, nor the Ordinance or Act No. 21 of 2026, amends the tax deduction at source provisions, and Rule 281A does not describe Form 173A as a declaration to the payer. Payers and custodians should examine the withholding position on Government security interest paid to FIIs under section 393 of the Income-tax Act, 2025 separately.
For the Bank for International Settlements
The BIS uses the same Form 173A. Note 4 to the form makes the TIN and SEBI registration fields optional for the BIS, and no such relaxation is stated for FIIs.
For resident taxpayers and Indian companies
Sl. Nos. 13D and 13E apply only to an FII and the BIS. Interest and capital gains of resident individuals and companies on Government securities continue to be taxed under the normal provisions of the Income-tax Act, 2025.
Frequently asked questions
What is Form 173A under the Income-tax Rules, 2026?
It is the form in which an FII or the BIS furnishes the information required to claim the Sl. No. 13D or 13E exemption. Notification No. 137/2026 dated October 19, 2026 inserted it.
From when does the Government securities exemption for FIIs apply?
The exemption applies from April 1, 2026, that is, from tax year 2026-27. Rule 281A and Form 173A came into force on October 19, 2026, on Gazette publication.
Which Government securities are covered?
"Government security" takes its meaning from section 2(f) of the Government Securities Act, 2006. Form 173A lists the security