# Finance Ministry Exempts NDB Maharaja Bond Interest From TDS New tax notification removes source deduction for resident and foreign institutional investors. - **Source:** [mint - money](https://www.livemint.com/rss/money) - **Published:** 2026-10-21 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/9bfc576c-7b4d-4963-827c-3278a5a0cbb8 ## TDS Exemption for Maharaja Bonds The Indian Ministry of Finance has officially exempted interest payments on Maharaja INR Bonds from tax deduction at source. This directive applies to eligible resident investors and foreign institutional investors holding these rupee-denominated debt instruments. The notification, published on October 19, 2026, aims to streamline the tax treatment for bondholders. ## Understanding Maharaja Bond Structure Maharaja Bonds are onshore, rupee-denominated debt instruments issued by international financial institutions within India. These bonds are specifically designed to mobilize capital for infrastructure and sustainable development projects. By issuing debt in local currency, the New Development Bank supports the growth and deepening of domestic capital markets for emerging economies. ## Strategic Role of NDB Established by BRICS nations, the New Development Bank focuses on financing infrastructure in developing countries. The bank plans to expand its market presence by issuing these INR-denominated bonds starting in 2026. This initiative follows high-level discussions between NDB President Dilma Rousseff and RBI Governor Sanjay Malhotra regarding regulatory cooperation and exposure. ## Regulatory Framework and Scope The exemption is granted under sub-section (1) of section 400 of the Income-tax Act, 2025. It specifically removes the requirement for tax deduction under section 393 for interest payments made by the NDB. This regulatory change covers the tax year 2026-27 and all subsequent years for all qualifying bondholders mentioned in the act. ## Compliance and Reporting Obligations Despite the TDS exemption, the New Development Bank remains subject to specific reporting requirements. The bank must furnish necessary information as mandated by Schedule VII of the Income-tax Act, 2025. These compliance measures ensure that the government maintains oversight of financial flows while facilitating easier investment processes for the bondholders involved. ## Impact on Institutional Investors Foreign Institutional Investors, as defined under section 210(6) of the Income-tax Act, 2025, benefit directly from this policy shift. By eliminating TDS, the government reduces the administrative burden and cash flow friction for international entities. This move is expected to enhance the attractiveness of Maharaja Bonds as a viable investment vehicle. ## Timeline of Implementation The tax exemption officially came into force on October 19, 2026, the date of its publication in the Official Gazette. Investors and financial institutions are advised to align their tax accounting practices with this new notification. The policy applies immediately to all interest payments made by the NDB to eligible bond holders. ## Broader Market Implications This regulatory adjustment signals India's commitment to fostering a more accessible environment for international development finance. By removing tax-related hurdles for NDB bondholders, the government encourages greater participation in local infrastructure funding. Market participants should consult tax experts to understand how these specific provisions apply to their unique investment portfolios and holdings. ## Sources covering this story - https://www.livemint.com/money/personal-finance/finance-ministry-exempts-interest-on-ndbs-maharaja-bonds-from-tds-what-changes-for-resident-investors-and-fiis-11792542841433.html — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._