The government has proposed a major relaxation in the tax rules governing offshore funds managed from India, in a move aimed at making the country a more attractive global fund management hub.
The Taxation Laws (Amendment) Bill, 2026, introduced in the Lok Sabha on Monday, removes several eligibility conditions that offshore funds were required to meet to qualify for tax exemption on their global income.
The Bill drops the requirement for offshore funds to have a minimum of 25 members, the 10% cap on individual participation, and the rule that the top 10 investors together cannot hold more than 50% of the fund. It also removes the 25% single-entity investment cap, the restriction on investing in associates, the requirement to maintain a monthly average corpus of at least Rs 100 crore, and proposes to relax the investor-protection test and the minimum remuneration requirement for fund managers.
Tax experts said the changes represent one of the biggest relaxations since the eligible investment fund regime was introduced.
Abheet Sachdeva, Partner – M&A Tax at Nangia Global, said, "These proposed changes are expected to significantly enhance the attractiveness of India's onshore fund management ecosystem for offshore funds and facilitate greater relocation of offshore fund management activities to India."
Experts said the removal of these conditions would make India's domestic fund management ecosystem more competitive and encourage global asset managers to shift investment management operations to the country.
The proposed amendments also remove the enabling provision that allowed the government to prescribe separate exemption conditions for funds operating from the International Financial Services Centre (IFSC).
"This eliminates the existing ambiguity between IFSC and non-IFSC offshore funds by introducing a uniform eligibility framework, ensuring that the same conditions apply to all eligible investment funds managed from India," Sachdeva said.
Industry experts noted that the amendments reflect a broader policy push to attract global capital amid rising competition from international financial centres. They pointed out that only five of the original 13 eligibility conditions would remain after the amendments, with key relaxations covering investor diversification, investment concentration limits, minimum remuneration thresholds and restrictions on investments in associates.
Besides the changes for offshore funds, the Bill also proposes 15-year tax holidays for foreign rough-diamond traders and electronics component warehousing operations. According to the Statement of Objects and Reasons, the measures are intended to address disruptions in global trade and supply chains arising from evolving geopolitical developments and to support sectors affected by external shocks.
