CBDT mandates Form 173A for claiming tax exemption on government securities
The Central Board of Direct Taxes now requires filing Form 173A to obtain tax exemption on interest and capital gains from government securities under the new Schedule IV provisions.
On October 19, the Central Board of Direct Taxes issued Notification No. 137/2026, adding Rule 281A to the Income-tax Rules, 2026. The rule obliges any assessee seeking the tax-free status of interest on government securities or capital gains from their sale—provided under Schedule IV entries 13D (foreign institutional investors) and 13E (Bank for International Settlements)—to submit Form 173A. Positioned after Form 173, the new form requires Part A details such as name, country of residence, address, PAN, tax year, email, and contact number, with optional TIN and SEBI registration numbers.
Part B can be repeated for multiple entries, and the document ends with a declaration signed by the principal officer. These changes stem from the Income-tax (Amendment) Ordinance, 2026, effective April 1, 2026, and align with the Income-tax Act, 2025 and the Government Securities Act, 2006.
Why it matters
It adds a filing step for investors to claim tax-free interest and gains on government securities, affecting foreign investors and BIS.
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