The Central Board of Direct Taxes (CBDT) has made Form 173A mandatory for eligible investors seeking income-tax exemptions on interest earned and capital gains arising from investments in government securities. The requirement was introduced under the Income-tax (Seventh Amendment) Rules, 2026, notified on October 19, 2026.
The amendment inserts Rule 281A into the Income-tax Rules, 2026, prescribing the information that eligible taxpayers must submit to claim exemptions under Schedule IV of the Income-tax Act, 2025. The rules came into force upon publication in the Official Gazette.
The exemption provisions, effective from April 1, 2026, cover qualifying interest income and capital gains from government securities, subject to the applicable conditions.
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Who Is Eligible For The Exemption?
The provisions primarily apply to specified foreign institutional investors (FIIs), foreign portfolio investors (FPIs) where eligible, and the Bank for International Settlements (BIS). The exemptions are intended to support foreign investment in Indian government securities while ensuring compliance with prescribed reporting requirements.
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Eligible investors must submit the required information through Form 173A to establish their entitlement to the tax benefits.
Details Required Under Form 173A
The prescribed form is divided into two parts. Part A collects the investor's identification and contact details, including name, country of residence, address, Permanent Account Number (PAN), tax year, email address and telephone number. It also requires the Tax Identification Number (TIN) issued in the investor's country of residence and Securities and Exchange Board of India (SEBI) registration details, where applicable.
Certain disclosure requirements, including TIN and SEBI registration details, are optional for the Bank for International Settlements.
Part B focuses on the government securities and income for which the exemption is being claimed. Investors must provide details such as the International Securities Identification Number (ISIN), type and tenor of the security, opening and closing holdings, purchases and sales during the tax year, gross interest received or accrued, and capital gains earned. Covered instruments include Treasury Bills, fixed and floating rate bonds, State Development Loans (SDLs), and other government securities.
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The form covers Treasury Bills, fixed-rate bonds, floating-rate bonds, State Development Loans and other eligible government securities. Monetary amounts must be reported in Indian rupees, and the declaration must be signed by the authorised principal officer confirming the accuracy of the information furnished.
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