India proposes tax relief measures to attract offshore investment funds

Monday 03 August 2026 - 10:45

By: Sahili Aya

India proposes tax relief measures to attract offshore investment funds

India is considering changes to its tax framework aimed at making the country more attractive to offshore investment funds by reducing the risk of local tax liabilities when foreign investors operate through India-based fund managers.

The proposed amendments, outlined in a draft bill, are part of government efforts to encourage international capital inflows at a time when India is facing significant foreign investment outflows and concerns from global investors over taxation practices.

Draft legislation targets investor concerns

Under the proposed changes, offshore funds using investment managers located in India would receive greater protection from potential Indian tax claims.

Foreign investors have previously raised concerns about what they described as uncertainty and aggressive enforcement in India's tax administration. The government’s latest proposal seeks to address these issues by creating a clearer framework for funds operating through domestic financial professionals.

The move is expected to improve confidence among international investors considering India as a base for managing global investment strategies.

Government seeks to reverse foreign outflow pressures

The proposed reform comes as Indian authorities look to strengthen the country’s appeal as a destination for foreign capital.

Despite strong economic growth prospects, India has faced periods of increased foreign investor withdrawals, influenced by global market conditions, valuation concerns and regulatory uncertainty.

By easing tax-related barriers, policymakers hope to attract more offshore funds and deepen the role of Indian financial centres, particularly Mumbai, the country’s leading hub for investment and capital markets.

Push to strengthen India’s financial ecosystem

The initiative forms part of broader efforts to expand India’s role in global finance and encourage international investors to use local expertise and infrastructure.

Officials believe that improving tax predictability could help increase investment activity, support domestic fund management capabilities and strengthen India’s position in the international financial system.

The final shape of the amendments will depend on legislative approval and further consultations with stakeholders.