Maharajah INR Bonds: Government announces TDS relief on interest

The government has notified that interest paid by the New Development Bank (NDB) on its Maharajah INR bonds will not attract tax deducted at source (TDS) for eligible investors from tax year 2026-27 onwards.

The Insurance Regulatory and Development Authority of India (Irdai) in August 2026 had allowed insurers to invest in Maharajah INR bonds issued by the New Development Bank (NDB).

The notification covers two categories of Maharajah INR bond holders:

Residents: Investors who qualify as residents under the applicable tax provisions.

Foreign Institutional Investors (FIIs): Investors covered by the definition under Section 210(6) of the Income-tax Act, 2025.

The government has issued the notification under Section 400 of the Income-tax Act, 2025. The government said that no deduction of tax will be made under Section 393(1) or Section 393(2) of the said Act.

The notification provides relief from TDS on the specified interest payments; it does not automatically make the interest income tax-free in the hands of every investor.

Whether the interest from Maharajah INR bonds is taxable will depend on the applicable tax provisions and the investor’s circumstances.

A Maharajah INR bond is an onshore, rupee-denominated bond issued within India. It is issued and settled in rupee (INR) rather than in foreign currencies.