What are Maharaja INR Bonds?
Maharaja Bonds are rupee-denominated debt instruments issued in India by international financial institutions to raise funds in the domestic currency. The proceeds can be used to finance infrastructure and sustainable development projects while supporting the development of India's local capital markets.
The New Development Bank was established by Brazil, Russia, India, China and South Africa (BRICS) to mobilise resources for infrastructure and sustainable development projects in emerging markets and developing economies.
In its 2025 annual report, the NDB said it planned to expand into new markets in 2026, including through the issuance of INR-denominated Maharaja Bonds in India.
On August 13, 2026, NDB President Dilma Rousseff met Reserve Bank of India (RBI) Governor Sanjay Malhotra in Jaipur. Discussions covered regulatory treatment of the bank's exposure in member countries, its engagement with Indian financial institutions and the proposed issuance of Maharaja Bonds to finance infrastructure development in India.
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What does the TDS exemption notification say?
In its October 19 notification, the Central Government exercised its powers under Section 400(1) of the Income-tax Act, 2025, to specify that TDS will not be deducted on interest payments made by the NDB to eligible holders of Maharaja INR Bonds during tax year 2026-27 and subsequent tax years.
The exemption covers the applicable TDS provisions under Section 393(1), Table Sl. No. 5, or Section 393(2), Table Sl. No. 17, of the Income-tax Act, 2025, depending on the nature of the payment.
The notification came into force on the date of its publication in the Official Gazette, October 19, 2026.
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Who is eligible for the exemption?
The notification identifies two categories of eligible bondholders:
Resident investors: Individuals or entities qualifying as residents under the applicable tax provisions.
Foreign institutional investors: FIIs as referred to in Section 210(6) of the Income-tax Act, 2025.
Eligible investors in these categories will receive interest payments on the covered bonds without TDS being deducted at source.
What are the reporting requirements?
The NDB must furnish the prescribed information under Schedule VII, Table Sl. No. 49, of the Income-tax Act, 2025, along with the applicable provisions of the Income-tax Rules, 2026.
The reporting requirement remains in place despite the TDS exemption, ensuring that the prescribed information on interest payments is furnished to the tax authorities.
For investors, the key distinction is that the notification removes TDS on qualifying interest payments but does not, by itself, establish that the interest income is entirely tax-free. Investors should assess their final tax liability under the provisions applicable to their individual circumstances.