The exemption from financial year 2026-27 is designed to attract domestic and foreign investors as the BRICS-backed lender seeks to raise ₹25,000 crore through rupee bonds.
The Indian government has removed tax deduction at source on interest payments from Maharajah Bonds issued by the New Development Bank, a change that could make the rupee-denominated securities more appealing to investors. The Central Board of Direct Taxes said in a notification dated October 19 that no TDS will apply to eligible bondholders in financial year 2026-27 and in later tax years, covering both residents and foreign institutional investors.
The move comes as the lender, set up by the BRICS countries in 2015, steps up efforts to expand local-currency funding in India and reduce borrowers’ exposure to exchange-rate swings. According to reporting by The Economic Times, Maharajah Bonds are onshore rupee bonds issued within India, unlike Masala bonds, which are sold overseas in global markets. The bank has said it wants to mobilise rupee funding for development projects and has outlined a plan to raise ₹25,000 crore through Maharajah Bonds over five years.
The exemption follows an August disclosure by the Insurance Regulatory and Development Authority of India that it had received a request from the bank seeking permission for insurers to invest in the bonds. The bank intends to use the proceeds for general corporate purposes, including financing or on-lending for sustainable infrastructure, green projects and social projects in India.
The tax break may also help broaden the investor base at a time when the bank is seeking greater access to domestic institutional money. The Economic Times reported that the New Development Bank has also signalled plans to invest $7.5 billion in India over five years, while working on its general strategy for 2027-2031, which will set out lending priorities and fund allocation across countries.
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