India proposes offshore fund tax relief

India has proposed amendments to its tax laws to shield offshore investment funds from Indian tax liabilities when they route investments through India-based fund managers. The draft bill, announced on August 3, 2026, aims to attract foreign capital and strengthen India as a fund management hub amid significant foreign outflows. The proposal removes minimum corpus and investor diversification requirements under the safe harbour rules, allowing offshore funds of any size or investor concentration to use Indian managers without triggering a tax liability, provided the bill is passed by parliament. Safeguards remain, including a cap of 5% on domestic investor assets and a prohibition on controlling Indian businesses. The changes are expected to reduce the risk of offshore funds being deemed to have a 'business connection' in India, thereby avoiding taxation on India-sourced profits at rates up to 38%. Experts, including Girish Vanvari of Transaction Square and Kaushal Sampat of PwC, welcomed the move as a significant ease-of-doing-business measure that will encourage offshore funds to hire onshore managers.