Centre introduces Taxation and Other Laws (Amendment) Bill in Lok Sabha, proposes fresh tax exemptions, investment-friendly reforms
New Delhi, August 4
The Central government on Tuesday introduced the Taxation and Other Laws Bill, 2026 in the Lok Sabha, proposing a series of tax changes aimed at boosting investment, supporting manufacturing, providing tax certainty and replacing the Income-tax Ordinance, 2026. The Bill seeks to amend the Income-tax Act, 2025, the Finance Act, 2026 and the Payment and Settlement Systems Act, 2007.
The bill brought against the backdrop of evolving geopolitical developments and disruptions in global trade and supply chains. The government said the amendments are intended to mitigate external economic shocks, ensure domestic economic stability and support sectors affected by prevailing global conditions while also providing greater ease of doing business and tax certainty.
One of the key taxation proposals in the Bill is the rationalisation of the conditions governing eligible offshore investment funds and eligible fund managers. The Bill proposes to simplify the framework of the Income-tax Act, 2025 by reducing compliance conditions while retaining core safeguards, with the objective of promoting fund management activity in India and providing greater tax certainty for global investors.
The Bill also proposes to extend tax incentives for electronics manufacturing. It seeks to extend the tax exemption available to foreign companies supplying capital goods, equipment or tooling to Indian contract manufacturers for specified electronic goods until the tax year ending March 31, 2041, instead of the earlier sunset of 2030-31. It also expands the definition of specified electronic goods to include products such as laptops, tablets, servers, hearables, wearables and related accessories.
Another significant proposal is the introduction of fresh tax exemptions for foreign investors in government securities. The Bill proposes to exempt interest income as well as capital gains arising from the sale, exchange or transfer of government securities for Foreign Institutional Investors (FIIs) and the Bank for International Settlements, subject to prescribed reporting requirements.
To strengthen India's position in the global diamond trade, the Bill proposes a tax exemption until March 31, 2041 for income earned by eligible foreign diamond mining companies, sight holders, brokers, aggregators and auction entities from the sale of rough diamonds conducted through notified special zones.
For business trusts, the Bill proposes to remove 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.
Apart from tax changes, the Bill proposes also proposes to amend the Payment and Settlement Systems Act, 2007 by removing references to the Income-tax Act in provisions relating to electronic payment modes. It empowers the Central Government to notify electronic payment modes on which banks or system providers cannot levy charges.
The Bill also seeks to repeal the Income-tax (Amendment) Ordinance, 2026 while validating actions already taken under the Ordinance. The government has said the proposed legislation will replace the Ordinance through an Act of Parliament and incorporate additional taxation measures considered necessary following stakeholder consultations after the Finance Act, 2026.
— ANI
Reader Comments
Interesting move to exempt FIIs from capital gains on government securities. This could really deepen our bond markets and bring in more foreign capital. Let's hope the reporting requirements don't become another bureaucratic hurdle for investors.
As a tax professional, I appreciate the move to simplify offshore fund conditions and provide tax certainty. But I wish the government would also focus on simplifying the overall GST structure and reducing compliance burden for small businesses. We need holistic reforms, not just piecemeal changes. 🤔
The diamond trade exemption until 2041 is a smart move to make India a global hub for rough diamond trading. Surat and Mumbai will benefit immensely. But I hope the government also addresses the issues of small traders and exporters who are struggling with compliance issues.
Good to see the government being proactive about global supply chain disruptions. The electronics manufacturing push is timely given the China+1 strategy many multinationals are adopting. India needs to move fast to seize this opportunity.
Removing the restriction on business trusts getting dividend exemption is a sensible change. It will help REITs and InvITs grow, which is crucial for infrastructure funding. But let's see how the government ensures these benefits actually reach retail investors and not just institutional players.
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.