The Indian government has proposed a sweeping easing of eligibility norms for Eligible Investment Funds (EIFs) managed from India, part of a push to establish the country as a global fund management hub. Under the Taxation and Other Laws (Amendment) Bill, 2026, offshore funds seeking tax exemption on their global income would no longer need to maintain a minimum of 25 investors, cap any single investor's participation at 10%, restrict investments of more than 25% of the corpus in one entity, avoid investments in associate entities, or keep a minimum average monthly corpus of Rs 100 crore, according to Business-Today.
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, Business-Today reported. The proposed changes are intended to make India's onshore fund management ecosystem more attractive to offshore funds and increase the relocation of offshore fund management activities to India, according to Abheet Sachdeva, Partner – M&A Tax at Nangia Global.
Easing of EIF eligibility norms
Business-Today reported that the main compliance requirements that offshore funds will no longer have to satisfy, if the Bill as proposed becomes law, include:
- Maintaining at least 25 investors;
- Limiting any single investor's participation to 10%;
- Restricting investments of more than 25% of the corpus in one entity;
- Avoiding investments in associate entities;
- Maintaining a minimum average monthly corpus of Rs 100 crore.
| Previous EIF compliance requirement | Proposed position under the 2026 Bill |
|---|---|
| Minimum 25 investors | Requirement removed |
| Single investor participation cap of 10% | Cap removed |
| Investment of more than 25% of corpus in one entity prohibited | Restriction removed |
| Investments in associate entities prohibited | Restriction removed |
| Minimum average monthly corpus of Rs 100 crore | Requirement removed |
A common framework for IFSC and non-IFSC funds
The Bill also proposes to remove the separate exemption criteria currently applicable to funds operating from the International Financial Services Centre (IFSC). According to Business-Today, the move is aimed at eliminating the current distinction between IFSC and non-IFSC offshore funds by creating a common eligibility framework for all investment funds managed from India.
Replacing the June 5 FPI tax Ordinance
In addition, the Bill seeks to replace the Ordinance issued on June 5, which 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 attract foreign capital and ease pressure on the rupee, which had come under strain during the West Asia crisis, Business-Today reported.
According to the Statement of Objects and Reasons accompanying the Bill, the Ordinance was issued to mitigate the impact of external economic shocks, preserve domestic economic stability and support sectors affected by prevailing global conditions. The statement added that subsequent policy assessment, in view of representations received from stakeholders after the enactment of the Finance Act, 2026, indicated that while the objective of the Ordinance continues to remain relevant, additional taxation measures are necessary to comprehensively achieve the same objective. It also said that, having regard to continuing global developments and the need for a timely and coherent response, it was considered appropriate to incorporate these measures in the Bill itself.
Expert reaction and policy context
"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," said Abheet Sachdeva, Partner–M&A Tax, Nangia Global, according to a PTI report.
Sachdeva separately said the proposed amendments are likely to make India's onshore fund management ecosystem far more attractive for offshore funds and encourage a greater shift of offshore fund management operations to the country.
In June, Finance Minister Sitharaman had said the measures announced by the Reserve Bank of India (RBI) and the government to boost foreign capital inflows represented the "first step" in bringing overseas investment back to India, while indicating that additional initiatives could follow. "We recognise, we need more foreign capital to come in," Sitharaman had said.
As part of these efforts, the government on June 5 broadened the list of securities eligible under the Fully Accessible Route (FAR) by including new issuances of government securities, with the aim of reducing compliance requirements for foreign investors. On the same day, the RBI permitted banks to access its swap facility for Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits with maturities of three to five years until September 30. The facility enables banks to swap US dollar deposits with the RBI, helping them manage currency risk. The government also introduced a concessional foreign exchange swap facility to encourage further foreign capital inflows.
For CFOs and treasury professionals, the removal of the investor-count, concentration and corpus thresholds would reduce the compliance burden on offshore funds seeking tax exemption on global income, and the unification of IFSC and non-IFSC rules would eliminate the current two-track framework. The replacement of the June 5 Ordinance with provisions in the Bill is intended, according to the Statement of Objects and Reasons, to ensure a timely and coherent response to continuing global developments.
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