India proposes major tax rule overhaul to lure offshore fund managers

The Finance Ministry has drafted a Taxation and Other Laws (Amendment) Bill that would substantially ease the rules governing Eligible Investment Funds managed from India, removing requirements such as a minimum of 25 investors, a 10% cap on any single investor, and a Rs 100 crore monthly corpus threshold. By eliminating these constraints, the government hopes to attract offshore funds seeking exemption from tax on global income and to erase the regulatory gap between funds based in the International Financial Services Centre and those elsewhere in the country.

The bill also supersedes a June 5 ordinance that granted tax relief on interest and capital gains for foreign portfolio investors in government securities, a measure originally introduced to ease rupee pressure amid the West Asia crisis. Finance Minister Nirmala Sitharaman is expected to table the legislation in the Lok Sabha soon. Tax advisors Abheet Sachdeva and Richa Sawhney say the reforms signal a move from short-term incentives toward a stable, long-term framework that could draw significant foreign capital and strengthen India's fund management ecosystem.