Summary: The Central Board of Direct Taxes (CBDT), through Notification No. 136/2026-Income Tax dated 19 October 2026, has exempted interest payments made by the New Development Bank (NDB) to eligible holders of Maharajah INR Bonds from tax deduction at source (TDS). Issued under Section 400(1) of the Income-tax Act, 2025, the notification provides that no tax shall be deducted under Section 393(1), Table Serial No. 5, or Section 393(2), Table Serial No. 17, as applicable, on interest paid to qualifying bondholders during tax year 2026-27 and subsequent tax years. The exemption covers residents and Foreign Institutional Investors (FIIs) referred to in Section 210(6) of the Act. The specified Maharajah INR Bonds issued by NDB are INR-denominated debt instruments. The notification provides relief from TDS but does not independently exempt the underlying interest income from taxation.
The notification also requires the New Development Bank to furnish information in accordance with Schedule VII, Table Serial No. 49, of the Income-tax Act, 2025, and the Income-tax Rules, 2026. Accordingly, while eligible interest payments are relieved from TDS, the bank remains responsible for complying with the prescribed information-reporting requirements. The exemption is restricted to interest on the specified bonds paid to eligible categories of holders and should not be treated as a general exemption for all interest payments or bond investments. The notification comes into force on 19 October 2026, being the date of its publication in the Official Gazette.
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
Notification No. 136/2026-Income Tax | Dated: 19th October, 2026
S.O. 5694(E).— In exercise of the powers conferred by sub-section (1) of section 400 of the Income-tax Act, 2025 (30 of 2025) (hereinafter referred to as the said Act), the Central Government hereby specifies that no deduction of tax shall be made under section 393(1) [Table: Sl.No. 5] or section 393(2) [Table: Sl.No. 17] of the said Act, as the case may be, on payment in the nature of interest, made by the New Development Bank to such person being holder of the Maharajah INR Bonds issued by the New Development Bank during the tax year 2026-27 and subsequent tax years.
2. For the purposes of this notification, the expression ‘holder of Maharajah INR Bonds’ shall mean —
(i) a resident; or
(ii) a Foreign Institutional Investor, as referred to in section 210(6) of the said Act.
3. The New Development Bank shall furnish information as required under Schedule VII (Table: Sl.No. 49) to the said Act and the provisions of the Income-tax Rules, 2026.
4. This notification shall come into force on the date of its publication in the Official Gazette.
[Notification No. 136/2026/F. No. 400/01/2026-IT(B)]
RAJENDRA KUMAR MEENA, Under Secy.
