With JPMorgan including India in its emerging market bond index from June 2024 without any tax policy change, the government has made it clear that it has no plans to offer any tax incentive for the bond inclusion in other index providers FTSE Russell and Bloomberg as well.

“The bond inclusion in the JP Morgan index is an interesting development and we will watch it,” a government source said, adding that the settlement of the Indian sovereign bonds would flow through the normal FPI route and would have to be settled onshore in rupee.

In fact, the JP Morgan bond inclusion announcement came years after delays as the government of India was opposed to providing any capital gains tax waivers to overseas debt investors and wanted global bond index operators to settle Indian government securities locally if they were included in their indexes.

Currently, appreciation in bond prices is considered capital gains and subject to tax. Short-term (less th…