Govt tables tax amendment Bill; proposes incentives for manufacturing, foreign investment
The Bill was introduced in the context of shifting geopolitical trends and disruptions to international supply chains and trade
The Taxation and Other Laws (Amendment) Bill, 2026, which is designed to replace the Income-tax (Amendment) Ordinance, 2026 and promote investment, manufacturing, and tax certainty, was presented by the central government to the Lok Sabha on Tuesday.
The Bill aims to modify the Payment and Settlement Systems Act of 2007, the Income-tax Act of 2025, and the Finance Act of 2026.
The Bill was introduced in the context of shifting geopolitical trends and disruptions to international supply chains and trade.
According to the government, the changes are meant to provide more ease of doing business and tax security while also mitigating foreign economic shocks, ensuring domestic economic stability, and supporting sectors impacted by current global conditions.
Rationalising the requirements for qualified offshore investment funds and eligible fund managers is one of the Bill’s major taxing ideas.
Furthermore, the Bill seeks to streamline the framework of the Income-tax Act, 2025 by lowering compliance requirements while maintaining essential protections in order to encourage fund management activities in India and give international investors more tax certainty.
Additionally, the Bill suggests extending tax breaks for the production of electronics. Instead of the earlier sunset of 2030-31, it aims to extend the tax exemption afforded to foreign corporations that sell capital goods, equipment, or tooling to Indian contract manufacturers for specific electronic goods until the tax year ending March 31, 2041.
Furthermore, it adds items like laptops, tablets, servers, wearables, wearables, and related accessories to the list of designated electronic goods.
The establishment of new tax advantages for international investors in government securities is another important suggestion. Subject to certain reporting requirements, the Bill would exempt interest income and capital gains resulting from the sale, exchange, or transfer of government securities for Foreign Institutional Investors (FIIs) and the Bank for International Settlements.
The Bill suggests a tax exemption until March 31, 2041 for income received by qualified foreign diamond mining companies, sight holders, brokers, aggregators, and auction entities from the sale of rough diamonds carried out through notified special zones in order to improve India’s standing in the international diamond trade.
