Income-tax (Seventh Amendment) Rules, 2026 introduce Rule 281A, prescribing detailed disclosure requirements for claiming exemption on interest income and capital gains from specified Government securities.
New Delhi, November 10, 2026: The Central Board of Direct Taxes (CBDT) has introduced a new reporting requirement for eligible investors seeking tax exemptions on interest income and capital gains arising from specified Government securities.
Through Notification No. 137/2026 dated October 19, 2026 (G.S.R. 901(E)), the CBDT notified the Income-tax (Seventh Amendment) Rules, 2026, inserting Rule 281A into the Income-tax Rules, 2026, and introducing a new Form No. 173A.
The amendment requires eligible taxpayers claiming exemptions under Serial Numbers 13D and 13E of Schedule IV of the Income-tax Act, 2025, to furnish prescribed information through Form 173A.
The new rules came into force on October 19, 2026, upon publication in the Official Gazette.
What Is Form 173A?
Form 173A has been introduced to collect information from eligible entities claiming exemption on interest and capital gains arising from Government securities.
The form is titled:
“Information to be furnished for claiming exemption on interest and capital gains from Government securities.”
The prescribed reporting mechanism is intended to provide the Income Tax Department with information about the claimant, the securities held, transactions undertaken and income for which exemption is being claimed.
Who Is Eligible for the Exemption?
The reporting requirement relates specifically to exemptions provided under Schedule IV, Table Serial Numbers 13D and 13E of the Income-tax Act, 2025.
These provisions cover:
1. Foreign Institutional Investors (FIIs)
Serial Number 13D provides the relevant exemption for qualifying foreign institutional investors in respect of interest income and capital gains from Government securities, subject to the prescribed conditions.
2. Bank for International Settlements (BIS)
Serial Number 13E provides the corresponding exemption for eligible income of the Bank for International Settlements arising from Government securities.
These are specific statutory exemptions and should not be interpreted as a general tax exemption available to every investor holding Government bonds.
Details Required in Form 173A
The newly prescribed form is divided into two major sections.
Part A – Basic Information
The claimant must provide details including:
- Name of the entity.
- Country of residence.
- Address in the country of residence or headquarters.
- Permanent Account Number (PAN).
- Tax Identification Number (TIN) in the country of residence.
- Tax year for which exemption is claimed.
- Email address and contact number.
- SEBI registration number, where applicable for an FPI/FII.
Certain information relating to TIN and SEBI registration is optional for the Bank for International Settlements.
Part B – Details of Government Securities
The form also requires detailed information about the Government securities in respect of which exemption is claimed.
The disclosures include:
- International Securities Identification Number (ISIN).
- Type of Government security.
- Tenor of the security.
- Total value of securities as on April 1.
- Value of securities purchased during the tax year.
- Sale consideration of securities sold during the year.
- Total value of securities as on March 31.
- Gross interest received or accrued during the tax year.
- Capital gains earned during the tax year.
The prescribed categories of Government securities include:
- Treasury Bills.
- Fixed Rate Bonds.
- Floating Rate Bonds.
- State Development Loans (SDLs).
- Other specified Government securities.
The form permits the securities-related information section to be repeated wherever required.
Special Relaxation for Bank for International Settlements
The notification provides a specific relaxation for the Bank for International Settlements.
For BIS, the information relating to the value of securities purchased during the year and sale consideration of securities sold during the year is optional.
This provision recognises the specific reporting treatment provided for the international institution under the prescribed form.
Declaration and Verification
Form 173A also requires a declaration confirming that the information furnished is true to the best of the declarant’s knowledge and belief and complies with the applicable provisions of Schedule IV of the Income-tax Act, 2025.
The declaration must be signed by the principal officer.
All monetary amounts are required to be reported in Indian rupees unless otherwise specified.
Implications for Foreign Investors and Tax Professionals
The introduction of Form 173A is relevant for foreign institutional investors, custodians, banks, investment managers and tax professionals handling Government securities transactions.
Eligible investors should review their investment records and ensure that the required details are available for the relevant tax year.
Tax professionals advising foreign investors should also examine the eligibility conditions under Schedule IV and ensure that the prescribed information is correctly furnished.
The reporting requirement may increase documentation and reconciliation work, particularly for investors holding multiple categories of Government securities.
What Should Investors and Finance Teams Do?
Eligible entities should consider the following compliance measures:
- Review eligibility under Schedule IV, Serial Numbers 13D and 13E.
- Maintain ISIN-wise investment records.
- Reconcile opening and closing holdings of Government securities.
- Maintain details of purchases and sales during the tax year.
- Calculate interest income and capital gains separately.
- Ensure that the prescribed declaration is properly verified.
It is important to note that Form 173A is not a general filing requirement for ordinary individual investors simply because they hold Government securities. It applies to entities claiming the specified exemptions.
Conclusion
The introduction of Form 173A represents another step in the implementation of the Income-tax Act, 2025, and its associated compliance framework.
By prescribing detailed disclosures for specified exemptions on Government securities, CBDT has established a structured reporting mechanism for eligible foreign institutional investors and the Bank for International Settlements.
For tax professionals and financial institutions, understanding the new reporting requirements will be important for ensuring accurate tax compliance and documentation.
Notification Reference: Notification No. 137/2026, G.S.R. 901(E), dated October 19, 2026.
Source: Central Board of Direct Taxes (CBDT), Ministry of Finance, Government of India.
Disclaimer: This article is intended for general informational purposes and does not constitute tax or legal advice. Readers should refer to the original notification and applicable provisions of the Income-tax Act, 2025.
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