Lok Sabha passes Taxation and Other Laws (Amendment) Bill to boost foreign investment, electronics manufacturing

The Lok Sabha on Thursday passed the Taxation and Other Laws (Amendment) Bill, 2026, which seeks to attract foreign investment, promote domestic manufacturing, provide greater tax certainty and replace the Income-tax (Amendment) Ordinance, 2026.

The Bill amends the Income-tax Act, 2025, the Finance Act, 2026 and the Payment and Settlement Systems Act, 2007.




According to the government, the amendments have been proposed against the backdrop of evolving geopolitical developments and disruptions in global trade and supply chains. The changes are aimed at mitigating external economic shocks, supporting sectors affected by global conditions, ensuring domestic economic stability and improving ease of doing business.

Finance Ministry sources had said the proposals are intended to make India a more attractive and predictable destination for global capital, manufacturing and business by providing "reliable policy and process certainty".

A key amendment simplifies the tax framework for eligible offshore investment funds and fund managers by reducing compliance requirements while retaining safeguards against misuse and round-tripping. The government expects the move to encourage more global fund managers to base their operations in India.

Also Read: Taxation laws amendment bill tabled in Lok Sabha: What the new tax bill changes for foreign investors

The Bill also provides tax exemptions on interest income and capital gains from government securities for Foreign Institutional Investors (FIIs) and the Bank for International Settlements (BIS), subject to prescribed reporting requirements.

To boost electronics manufacturing, the legislation extends the tax exemption available to foreign companies supplying capital goods, equipment and tooling to Indian contract manufacturers of specified electronic goods until the tax year ending March 31, 2041, from the earlier sunset date of 2030-31. The list of specified electronic goods has also been expanded to include laptops, tablets, servers, hearables, wearables and related accessories.

The Bill further grants a 15-year income tax exemption to foreign companies storing electronic components in customs-bonded warehouses for supply to Indian contract manufacturers, a move aimed at strengthening the electronics supply chain.

In another measure to support digital infrastructure, the legislation removes approval requirements for foreign cloud companies using Indian data centres and allows data centres to operate on a leased basis instead of requiring direct ownership.

To strengthen India's position in the global diamond trade, the Bill extends tax exemptions until March 31, 2041, for income earned by eligible foreign diamond mining companies, sightholders, brokers, aggregators and auction entities from the sale of rough diamonds through notified special zones.

For business trusts such as REITs and InvITs, the legislation removes an existing restriction that denied tax exemption on dividends received by unit holders where the special purpose vehicle (SPV) had opted for the new tax regime, while introducing a corresponding levy at the SPV level to keep the measure revenue neutral.

The Bill also amends the Payment and Settlement Systems Act, 2007, empowering the Centre to notify electronic payment modes on which banks or payment system providers cannot levy charges. It also removes references to the Income-tax Act from provisions governing electronic payment modes and expands the scope of payment modes that can be notified.

The legislation repeals the Income-tax (Amendment) Ordinance, 2026, while validating actions already taken under it. The government said the Bill incorporates additional taxation measures deemed necessary following stakeholder consultations after the enactment of the Finance Act, 2026.

(With inputs from agencies)