New Delhi: The Taxation and Other Laws (Amendment) Bill, 2026, passed by the Lok Sabha, seeks to reshape India’s tax framework by extending incentives for electronics manufacturing and easing rules for global funds inflow. The amended law also simplifies data-centre taxation and aims to strengthen country’s position in global diamond trading. The larger goal is to shape India as a global capital hub, by attracting significant FDI. The goal is also not just to facilitate FDI flow, but also to make it stay, accelerate manufacturing and build long-term business ecosystem in the country.
With this vision, The Lok Sabha on August 6, Thursday passed the Taxation and Other Laws (Amendment) Bill, 2026, replacing the Income-tax (Amendment) Ordinance, 2026, issued earlier this year. Introduced by Finance Minister Nirmala Sitharaman, the legislation amends the Income-tax Act, 2025, the Finance Act, 2026 and the Payment and Settlement Systems Act, 2007.
The Bill gains greater importance amid unfolding geopolitical uncertainties, disruptions in global supply chains and intensifying competition among economies to attract investment. Its provisions seek to provide greater tax certainty, reduce compliance nd regulatory burdens and strengthen sectors seen as critical to India’s economic and strategic ambitions.
The legislation seeks to make India a more predictable destination for global capital, manufacturing and high-value financial activity. It aims to pitch India’s strong footprint in global manufacturng and supply chain. It intends to revolutionise India as a credible, resilient, stable and trustworthy investment and business-freindly hub.
Electronics Push: Tax holiday extended till 2041
One of the biggest takeaways in the amendment is the extension of tax incentives for foreign companies who supply capital goods, equipments and tools to Indian contract manufacturers for specified electronic products.
The exemption, which was earlier available until 2030-31, has now been extended until March 31, 2041. The legislation also provides greater clarity by specifying the electronic products covered under the tax exemption bracket, which includes mobile phones, laptops, tablets, personal computers, servers, hearables, wearables and related parts and accessories.
The move is particularly significant to fulfill India’s ambition to become a major global electronics manufacturing hub. As companies diversify supply chains beyond traditional manufacturing bases, predictable tax treatment can influence foreign investment decisions in the country.
The Bill also introduces a 15-year tax exemption for foreign companies who store electronic components in customs-bonded warehouses before supplying them to Indian manufacturers of specified electronic products. This also enhances trust in the Indian market and aids foreign investors to pitch long-term businesses in India.
The measure will also strengthen the supply chain around electronics manufacturing and helps to reduce import dependency. By extending tax benefits upto 2041, the government is willing to provide a long-term policy horizon for companies to make capital-intensive investments in India. It will also harness ease-of-doing business in the country.
Global funds, foreign investors get tax certainty boost
The Taxation and Other Laws (Amendment) Bill, 2026 also seeks to make India more attractive destination for global investment funds and fund managers.
Existing rules imposed several conditions on overseas investment funds managed from India, including requirements relating to the number of investors, fund size, investment concentration and the share of individual investors. The amendments rationalises these conditions while retaining safeguards against misuse and round-tripping.
The government’s measure is aimed to encourage global fund managers to relocate more of their operations to India, which will potentially bring high-value financial services, skilled employment and associated economic activity to the country.
Tax exemption on interest income & capital gains earned from FPIs
Another major measure provides tax exemptions to eligible Foreign Portfolio Investors(FPIs) and the Bank for International Settlements(BISs) on interest income and capital gains earned from Indian government securities. However, this is subjected to prescribed reporting requirements.
The move could improve the attractiveness of the Indian government debt bonds for overseas investors, as it reduces the tax friction associated with such investments. This will also position India as a trusted global financial-services hub where fund managers can manage international capital without triggering unintended domestic tax exposure.
Data centres and diamonds: Expanding India’s investment map
The Bill also attempts to simplify the tax framework for foreign cloud companies using Indian data centres. Previously, tax benefits were linked to government approvals and notifications. However, the proposed changes remove these approval requirements and allow qualifying data centres to operate on a leased basis, rather than requiring direct ownership.
This could make it easier for global technology and cloud companies to tap India’s rapidly expanding digital infrastructure without having to build and own every facility themselves. In an era, where data and digital ecosystem is emerging as the epicentre of economic growth, this eased regulations, facilitates more global data companies to operate in India. It will also aid India’s rapid Digital Public Infrastructure(DPI) expansion goal.
The legislation also introduces a 15-year tax exemption for eligible foreign companies engaged in rough diamond trading through notified special zones, including qualifying mining companies, sightholders, brokers, aggregators and auction entities. The objective is to strengthen India’s position as a global diamond trading hub and attract more international players into the country’s diamond ecosystem.
No additional charges for UPI transactions, Tax neutrality for Real Estate Investment Trusts
The latest legislation also addresses the taxation rules for Real Estate Investment Trusts(REITs) and Infrastructure Investment Trusts (InvITs). It removes a restriction that could result in investors losing tax-exempt treatment on certain dividends. The Bill restores the exemption at the investor level. The change is significant for infrastructure and real estate investors because it seeks to preserve the tax neutrality of these investment structures and provide greater certainty to unit holders.
For ordinary consumers, the Bill does not impose charges for UPI transactions. Instead, it empowers the Centre to notify electronic payment modes on which banks or payment system providers cannot levy charges.
Finance Minister Nirmala Sitharaman clarified that any potential Merchant Discount Rate, if introduced, would apply to merchants rather than UPI customers.
The amendments to the Taxation and Other Laws Bill, 2026, thus represents an investment, manufacturing and consumer-friendly policy to boost the economic growth. From electronics and data centres to global investment flow, government securities, infrastructure trusts and diamond trading, the government i is aiming for generating long-term capital, solid manufacturing boom, employment generation and strong presence in global supply chain amid spiralling geopolitical and geo-economic upheavals.
