Home Minister Rajnath Singh today gave approval for the visa extension, official sources said.
Ms Nasreen, a citizen of Sweden, has been getting Indian visa on a continuous basis since 2004.
Her visa has been further extended on the basis of the Swedish passport, they said.
Ms Nasreen has been living in exile since she left Bangladesh in a cloak of secrecy in 1994 in the wake of threats to her by fundamentalist groups.
She has also stayed in the US and Europe during the last two decades. However, on many occasions she had expressed her wish to live in India permanently, especially in Kolkata.
Ms Nasreen had also applied for a permanent residency in India. "No decision has been taken on it by the home ministry," a source said.
The writer also had to leave Kolkata in 2007 following violent street protests by a section of Muslims against her works.
Taslima Nasreen had said if she is not able to stay on in India she will suffer from an "identity crisis" which will affect her writings and championing the cause of women's rights.