No TDS on Maharajah INR Bonds from Tax Year 2026-27 onwards: What investors need to know

The Central Board of Direct Taxes (CBDT) has exempted interest payments on Maharajah INR Bonds issued by the New Development Bank (NDB) from tax deduction at source (TDS) for eligible investors from tax year 2026-27 onwards.

In Notification No. 136/2026, dated October 19, 2026, the Central Government specified that no tax shall be deducted at source on qualifying interest payments made by NDB to holders of these bonds during tax year 2026-27 and subsequent tax years.

Who is eligible for the TDS exemption?

The notification, issued under Section 400(1) of the Income-tax Act, 2025, covers residents and foreign institutional investors (FIIs) referred to under Section 210(6) of the Act.

The exemption applies to interest payments covered under Section 393(1), Table Sl. No. 5, or Section 393(2), Table Sl. No. 17, as applicable.

The notification will come into force on the date of its publication in the Official Gazette.

What are Maharajah INR Bonds?

Maharajah INR Bonds are Indian rupee-denominated debt instruments that NDB plans to issue in the domestic Indian market. As a bond issuer, the bank would raise funds from investors and pay interest according to the terms of the securities.

In its 2025 annual report, NDB said it planned to expand into new markets in 2026, including through the issuance of INR-denominated Maharajah Bonds in India. The bank has described the proposed onshore issuance as an initiative to strengthen its local-currency financing operations, with support from the Government of India and the Reserve Bank of India (RBI).

How could rupee-denominated bonds help?

NDB has highlighted the potential of such bonds to attract international investors while mitigating currency risks for Indian issuers.

The bank's proposed issuance is part of its broader effort to develop local-currency financing.

The CBDT notification, however, specifically addresses the tax deduction treatment of interest payments to eligible bondholders; it does not set out the size, interest rate or maturity of the proposed bonds.

What does the TDS exemption mean?

The notification was issued by Rajendra Kumar Meena, Under Secretary, Ministry of Finance, under Notification No. 136/2026.