As of October 21, 2026, India’s government has notified relief from tax deducted at source (TDS) on interest paid by the New Development Bank (NDB) on Maharajah INR bonds. The relief applies to eligible resident investors and qualifying foreign institutional investors from tax year 2026-27 onward. It removes withholding on the specified payments, rather than automatically making the interest tax-free.
Key Takeaways
- Eligible residents and qualifying foreign institutional investors can receive the specified interest without TDS.
- The notification applies from tax year 2026-27 onward under the Income-tax Act, 2025.
- Investors must distinguish relief from withholding from any final tax liability on interest.
Table of Contents
- Who qualifies for Maharajah INR bonds TDS relief?
- No withholding does not mean no income tax
- The bond programme’s infrastructure purpose
- Conclusion
Who qualifies for Maharajah INR bonds TDS relief?
The notification covers two categories of bondholders: investors who qualify as residents under the applicable tax provisions, and foreign institutional investors within the definition in Section 210(6) of the Income-tax Act, 2025.
The government issued the notification under Section 400 of that Act. It provides that tax will not be deducted under Section 393(1) or Section 393(2) on the covered interest payments. The stated eligibility should not be read as a blanket exemption for every type of investor.
| Item | Details |
|---|---|
| Interest payer | New Development Bank |
| Effective period | Tax year 2026-27 onward |
| Resident eligibility | Residence determined under the applicable tax provisions |
| FII eligibility | Definition in Section 210(6) of the Income-tax Act, 2025 |
No withholding does not mean no income tax
TDS is tax deducted when a payment is made. Removing that deduction allows eligible holders to receive the specified interest without tax being withheld at that stage.
The notification does not, by itself, settle whether the interest is taxable in an investor’s hands. That depends on the applicable tax provisions and the investor’s circumstances. The practical distinction is between how interest is paid and how it is ultimately taxed.
The bond programme’s infrastructure purpose
Maharajah INR bonds are onshore, rupee-denominated bonds issued and settled in India’s currency. NDB’s description of its proposed local-currency infrastructure financing explains the programme’s intended purpose: financing infrastructure in India.
That context comes from NDB’s account of an August 13, 2026 meeting between its president, Dilma Rousseff, and Reserve Bank of India Governor Sanjay Malhotra. NDB described the Maharaja Bond issuance as proposed at that time; the account does not establish that an issuance or settlement had taken place.
Separately, the Insurance Regulatory and Development Authority of India allowed insurers to invest in NDB’s Maharajah INR bonds in August 2026. That investment permission is distinct from the subsequent relief on withholding tax.
Conclusion
The confirmed application point for Maharajah INR bonds TDS relief is tax year 2026-27 onward. For holders, the key issue remains whether they fall within the specified eligible categories; the notification alone does not determine their final tax liability.
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