CBDT Form 173A introduces a new reporting requirement for eligible foreign institutional investors and the Bank for International Settlements (BIS) seeking income-tax exemptions on interest and capital gains from government securities.
The Central Board of Direct Taxes notified the Income-tax (Seventh Amendment) Rules, 2026, on October 19, bringing the new requirement into effect upon publication in the Official Gazette.
The change specifies the information eligible claimants must submit to receive the tax benefits provided under the Income-tax Act, 2025.
It does not extend these exemptions to every individual who invests in government bonds or Treasury Bills.
CBDT Form 173A: Who Can Claim Tax Exemption?
CBDT Form 173A applies to claims covered by entries 13D and 13E of Schedule IV of the Income-tax Act, 2025. Entry 13D covers specified foreign institutional investors (FIIs), while entry 13E applies to the Bank for International Settlements.
The exemptions cover eligible interest income and capital gains arising from the sale, exchange or transfer of government securities, subject to the applicable legal conditions.
The underlying tax exemptions apply to qualifying income arising on or after April 1, 2026.
For ordinary retail investors, the new form does not create a fresh tax exemption on government securities. Instead, it establishes a prescribed reporting process for entities already covered by the relevant provisions.
What Information Must Be Provided in Form 173A?
The new form has two parts. Part A collects basic details about the claimant, including the name, country of residence, address, Permanent Account Number (PAN), tax year, email address and contact number.
It also asks for the claimant’s Tax Identification Number (TIN) in the country of residence and Securities and Exchange Board of India (SEBI) registration number as an FPI or FII, where applicable.
These two details are optional for the Bank for International Settlements.
Part B focuses on government securities and the income for which the exemption is claimed.
Applicants must provide the International Securities Identification Number (ISIN), type and tenor of the security, along with the relevant investment and income details.
The form covers Treasury Bills, fixed-rate bonds, floating-rate bonds, State Development Loans (SDLs) and other eligible government securities.
Claimants must disclose the value of securities held at the beginning and end of the tax year, purchases made during the year and the sale consideration of securities sold.
They must also report gross interest received or accrued during the tax year and capital gains earned during the period.
Amounts must be reported in rupees unless otherwise specified, and Part B can be repeated when details of multiple securities need to be furnished.
Why Has CBDT Introduced the New Reporting Requirement?
The new reporting framework sets out the information required to support tax exemption claims.
By collecting details of holdings, transactions, interest income and capital gains, Form 173A creates a standardised process for eligible investors to disclose income covered by the specified exemptions.
The form also requires a declaration confirming that the information provided is accurate to the best of the signatory’s knowledge and belief and complies with the relevant provisions of Schedule IV.
The declaration must be signed by the principal officer of the claimant.
The requirement follows the government’s broader effort to attract stable, long-term foreign investment into India’s government securities market.
The exemption provisions were introduced to make the tax treatment of eligible investments more competitive internationally and encourage participation by foreign institutional investors and the Bank for International Settlements.
What Investors Should Know About the New Rule
The Income-tax (Seventh Amendment) Rules, 2026, were notified on October 19 and came into force on the date of publication in the Official Gazette.
The amendment inserted Rule 281A into the Income-tax Rules, 2026, and introduced Form 173A for claims under the specified provisions.
Eligible entities seeking the exemptions should ensure that their disclosures are complete and consistent with the applicable requirements.
The information includes both investment holdings and income earned during the tax year, making accurate transaction records important when preparing a claim.
For individual investors, the key distinction is that this notification concerns the documentation required for specific tax exemptions available to qualifying foreign institutional investors and the Bank for International Settlements.
It should not be interpreted as a general tax exemption for all government bond investors.
