Finance Ministry exempts interest on NDB’s Maharaja Bonds from TDS: What changes for resident investors and FIIs?
The Ministry of Finance has exempted interest payments on Maharaja INR Bonds issued by the New Development Bank (NDB) from tax deduction at source (TDS) for eligible investors, including resident Indians and foreign institutional investors (FIIs).
The New Development Bank is a multilateral development bank established by Brazil, Russia, India, China and South Africa (BRICS) to mobilise resources for infrastructure and sustainable development projects in emerging markets and developing countries. Here’s what investors need to know about the latest TDS exemption.
What are Maharaja Bonds?
Maharaja Bonds are onshore, rupee-denominated debt instruments issued in India by international financial institutions to raise funds in Indian rupees. The proceeds can be used to finance infrastructure projects and support the development of local capital markets.
According to the latest New Development Bank’s (NDB) 2025 annual report, “In 2026, the Bank plans to expand into new markets, including the issuance of INR-denominated Maharaja bonds in India.”
On 13 August 2026, New Development Bank (NDB) President Dilma Rousseff met Reserve Bank of India (RBI) Governor Sanjay Malhotra in Jaipur to discuss strengthening cooperation between the two institutions.
According to the NDB, discussions covered the regulatory treatment of its exposure in member countries, its ongoing work with Indian financial institutions, and the proposed issuance of Maharaja Bonds — rupee-denominated debt instruments intended to finance infrastructure development in India.
What does the Ministry of Finance notification say?
In a notification dated 19 October 2026, the Ministry of Finance specified that no TDS shall be deducted on interest payments made by the NDB to eligible holders of its Maharaja INR Bonds during the tax year 2026-27 and subsequent tax years.
The notification states, “In exercise of the powers conferred by sub-section (1) of section 400 of the Income-tax Act, 2025 (30 of 2025) (hereinafter referred to as the said Act), the Central Government hereby specifies that no deduction of tax shall be made under section 393(1) [Table: Sl.No. 5] or section 393(2) [Table: Sl.No. 17] of the said Act, as the case may be, on payment in the nature of interest, made by the New Development Bank to such person being holder of the Maharajah INR Bonds issued by the New Development Bank during the tax year 2026-27 and subsequent tax years.”
Who is eligible for the TDS exemption?
The notification clarifies that the exemption applies to holders who are either residents or foreign institutional investors, as referred to in section 210(6) of the Income-tax Act, 2025.
The notification defines a holder of Maharaja INR Bonds as:
(ii) a Foreign Institutional Investor, as referred to in section 210(6) of the said Act.
This means eligible resident investors and qualifying FIIs holding these bonds will not have tax deducted at source on the interest payments covered by the notification.
What reporting requirements apply for TDS exemption?
The notification also requires the New Development Bank to furnish information under Schedule VII (Table: Sl. No. 49) of the Income-tax Act, 2025, and the applicable provisions of the Income-tax Rules, 2026.
The notification states that it will come into force on the date of its publication in the Official Gazette. Therefore, the exemption takes effect from 19 October 2026, as the notification was published in the Gazette on that date.
Disclaimer: This is for informational purposes only. Please consult a tax expert for the latest regulations and their applicability to your specific circumstances.
