India's government has proposed a broad relaxation of the tax conditions applied to Eligible Investment Funds managed from the country, seeking to make domestic fund management more competitive for global capital. The changes form part of the Taxation and Other Laws (Amendment) Bill, 2026, circulated to lawmakers ahead of its expected introduction in the Lok Sabha.
Offshore funds seeking an exemption on worldwide income would no longer need at least 25 investors or face the existing 10 percent ceiling on any single participant. The bill would also remove the rule preventing a fund from placing more than 25 percent of its corpus in one entity.
Additional conditions would disappear as well. Eligible funds would be allowed to invest in associated entities and would no longer have to maintain an average monthly corpus of 1 billion rupees. Together, the revisions lower both structural and scale barriers for managers considering a base in India.
The bill also eliminates separate exemption criteria for funds operating from the International Financial Services Centre. A common eligibility framework would therefore apply to offshore investment funds managed from India, whether or not their operations are located inside the IFSC.
Finance Minister Nirmala Sitharaman is expected to introduce the measure. The bill would replace a June 5 ordinance that exempted foreign portfolio investors from tax on interest income and capital gains from government securities, an intervention adopted to attract capital and relieve pressure on the rupee during the West Asia crisis.
The tax proposal follows other steps taken on June 5. The government expanded the Fully Accessible Route to include new government-security issuances, while the Reserve Bank of India allowed banks to use a foreign-exchange swap facility for three- to five-year FCNR(B) deposits until September 30. Public-sector companies also received access to a concessional swap arrangement for external commercial borrowing.
Those measures had generated net inflows of $40.81 billion by July 31. India's foreign-exchange reserves rose by $6.118 billion to $682.354 billion in the week ending July 24, providing an early measure of stronger foreign-currency availability after the policy response.
Tax specialists described the bill as a move from emergency support toward a longer-term competitiveness framework. By combining easier fund-management rules with incentives affecting government securities, electronics supply chains, data centers and diamond trading, the package seeks greater tax certainty, more resilient supply chains and a larger share of global financial activity based in India.
