The Central Government has proposed significant changes to the tax framework governing offshore investment funds managed from India, with the objective of strengthening the country's position as a global fund management hub. Through the Taxation and Other Laws (Amendment) Bill, 2026, the Government has proposed to substantially ease the eligibility conditions for Eligible Investment Funds (EIFs) seeking tax exemption on their global income. 
Under the proposed amendments, offshore funds managed from India will no longer be required to meet several existing conditions to qualify for tax exemption. These include maintaining a minimum of 25 investors, limiting a single investor's participation to 10 per cent, restricting investments of more than 25 per cent of the fund corpus in one entity, avoiding investments in associate entities, and maintaining a minimum monthly average corpus of INR 100 crore. 
The Bill, which has been circulated among Members of Parliament, is expected to be introduced in the Lok Sabha shortly by Finance Minister Nirmala Sitharaman. 
Another key proposal is the removal of separate exemption conditions for funds operating from the International Financial Services Centre (IFSC). Instead, the Government has proposed a common eligibility framework for all eligible investment funds managed from India, irrespective of whether they operate from IFSC or outside it. The move is expected to remove ambiguity between IFSC and non-IFSC offshore funds and provide greater regulatory clarity. 
Abheet Sachdeva, Partner – M&A Tax at Nangia Global, said the proposed changes are expected to make India's onshore fund management ecosystem more attractive for offshore funds and encourage more global fund management activities to shift to India. 
The Bill also seeks to replace the Ordinance issued in early June, which had granted tax exemption on interest income and capital gains earned by Foreign Portfolio Investors (FPIs) from investments in Government securities (G-Secs). The Ordinance was introduced to support foreign capital inflows at a time when the Indian rupee was facing pressure due to geopolitical tensions in West Asia. 
According to the Statement of Objects and Reasons accompanying the Bill, the Ordinance was intended to reduce the impact of external economic shocks, maintain domestic economic stability and support sectors affected by global uncertainties through urgent amendments to taxation laws. 
The Government has further stated that, after reviewing feedback received from stakeholders following the enactment of the Finance Act, 2026, it concluded that additional tax measures were necessary to achieve these objectives more comprehensively. Considering the continuing global economic developments, it decided to incorporate these provisions into the Bill to ensure a timely and consistent policy response. 
The proposed legislation builds on a series of measures announced in June to boost foreign capital inflows. At that time, Finance Minister Nirmala Sitharaman had indicated that the initiatives introduced by the Government and the Reserve Bank of India (RBI) were only the first step towards attracting more overseas investment and had suggested that additional measures could follow. She had also stated that India recognised the need to attract more foreign capital. 
As part of those initiatives, the Government expanded the list of Government securities eligible under the Fully Accessible Route (FAR) by including new issuances, making it easier for foreign investors to invest in Indian sovereign debt. Around the same period, the RBI allowed banks to access its swap facility for Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits with maturities between three and five years until September 30. The facility enables banks to swap US dollar deposits with the RBI to better manage currency risks. 
The Government had also introduced a concessional foreign exchange swap facility to encourage public sector enterprises to raise external commercial borrowings (ECBs) until September 30. According to the Government, these measures together had attracted USD 40.81 billion in inflows by the end of July. 
India's foreign exchange reserves also increased by USD 6.118 billion to USD 682.354 billion during the week ended July 24, reflecting stronger foreign capital inflows. 
Richa Sawhney, Partner – Tax at Grant Thornton Bharat, said the Bill represents a shift from immediate relief measures towards creating a more competitive long-term tax framework. She noted that while the earlier Ordinance addressed short-term challenges arising from global economic developments, the Government has now expanded those measures after stakeholder consultations to provide greater tax certainty and strengthen India's economic resilience. 
She further said the proposed liberalisation of the fund management regime, along with measures supporting electronics supply chains, data centres, diamond trading and tax relief for foreign investors in Government securities, reflects the Government's broader strategy of attracting global capital and business activity to India. According to her, the amendments also highlight a focus on investment facilitation, supply-chain resilience and long-term tax certainty. 
The Statement of Objects and Reasons further noted that evolving geopolitical developments and disruptions in international trade and supply chains had created considerable uncertainty in the global economy. It added that urgent taxation measures were therefore considered necessary in the larger public interest to reduce the impact of external shocks, maintain economic stability and support sectors affected by prevailing global conditions. 
Source PTI