Taxation laws amendment bill tabled in Lok Sabha

The Union Government has introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha. The Bill seeks to improve the Ease of Doing Business, attract greater Foreign Direct Investment, and strengthen India’s position as a global investment destination.

It proposes amendments to the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025, and the Finance Act, 2026.

Key Provisions of the Bill

1. Government Securities: FIIs and the Bank for International Settlements will be exempt from tax on interest income and capital gains arising from government securities.
2. Rough Diamonds: Foreign companies and specified entities involved in the sale of rough diamonds in notified special zones will receive income-tax exemption.
3. Electronics Manufacturing: Tax exemption will apply to income from warehousing electronic components in Customs Bonded Areas and supplying machinery, equipment and tooling to Indian contract manufacturers.
4. Overseas Investment Funds: Several eligibility conditions for foreign investment funds managed from India will be removed, including minimum membership, corpus and investment-diversification requirements.
5. Business Trusts: The surcharge on special purpose vehicles of business trusts will increase from 10% to 25%, while unit holders will receive exemption on specified dividend income.
6. Data Centres: Tax exemptions will be extended to foreign companies procuring services from data centres leased and operated by Indian companies, with fewer notification and approval conditions.
7. Digital Payments: The Bill proposes to remove the mandatory zero-MDR provision under the Payment and Settlement Systems Act, 2007.

Significance

The Bill is expected to improve policy certainty and reduce compliance barriers for foreign investors. It may encourage greater FDI, promote electronics manufacturing and digital infrastructure, attract global fund-management operations, support investment in real estate and infrastructure, and generate employment in high-value sectors.