A new seven-level inverter topology for IM drive is proposed in this paper. This topology consists of two three-phase two-level inverters fed by isolated DC voltage sources and six H-bridges fed by capacitors. An important advantage of this topology is the reduction in DC link voltage magnitude by half when compared with the requirement of DC link voltage in conventional NPC or flying capacitor topologies. The switching state redundancies that exist in generating the middle voltage levels are effectively utilized in balancing the H-bridge capacitor voltages. The proposed topology is inherently capable of preventing the circulation of triplen harmonic current caused by the common mode voltage appearing on the motor winding. Another feature that enhances the reliability of the proposed drive system is its ability to function in three-level mode in case of any switch failure in H-bridges. Extensive simulation study and experimental verification of the proposed topology are carried out for the entire modulation range.