India, Jan. 26 -- India is preparing to make a major cut in import taxes on cars coming from the European Union. The duty may fall to 40%, down from the current high level of up to 110%, according to sources. This step would mark one of the biggest openings of India's automobile market as India and the EU move closer to signing a long-awaited free trade agreement (FTA), which could be announced as early as Tuesday.

Sources familiar with the discussions told Reuters that Prime Minister Narendra Modi's government has agreed to immediately lower the tax for a limited number of EU-made cars priced above 15,000 euros ($17,739). Over time, this duty is expected to fall even further to 10%. This change would make it easier for European car comp...