Lok Sabha passes bill to boost foreign investments, domestic manufacturing
What's the story
The Lok Sabha has passed the Taxation and Other Laws (Amendment) Bill, 2026. The legislation is aimed at attracting foreign investment and promoting domestic manufacturing in India. It seeks to provide greater tax certainty for businesses operating in the country. The bill also simplifies tax frameworks for offshore investment funds and fund managers while extending tax exemptions for electronics manufacturing and diamond trade.
Legislative details
Bill amends several existing acts
The bill amends the Income-Tax Act, 2025, Finance Act, 2026, and Payment and Settlement Systems Act, 2007.
The government has proposed these amendments in light of changing geopolitical realities and disruptions in global trade and supply chains.
The changes are aimed at shielding India from external economic shocks, helping sectors impacted by global developments, ensuring domestic economic stability, and improving ease of doing business.
Tax simplification
Offshore investment funds, fund managers
A major amendment in the bill simplifies the tax framework for eligible offshore investment funds and fund managers.
The move is expected to encourage more global fund managers to set up their operations in India.
The legislation 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.
Exemptions extended
Electronics manufacturing
The bill extends tax exemptions for foreign companies supplying capital goods, equipment, and tooling to Indian contract manufacturers of specified electronic goods until March 31, 2041.
The list of specified electronic goods has also been expanded to include laptops, tablets, servers, hearables/wearables, and their accessories.
To strengthen the electronics supply chain further, a 15-year income tax exemption is granted to foreign companies storing electronic components in customs-bonded warehouses for supply to Indian contract manufacturers.
Infrastructure support
Global diamond trade
The bill removes approval requirements for foreign cloud companies using Indian data centers and allows data centers to operate on a leased basis instead of requiring direct ownership.
To strengthen India's position in the global diamond trade, tax exemptions are extended until March 31, 2041, for income earned by eligible foreign diamond mining companies from the sale of rough diamonds through notified special zones.
Amendments
Other key amendments in the bill
The bill has also amended the Payment and Settlement Systems Act, 2007. It empowers the Centre to notify electronic payment modes on which banks or payment system providers cannot levy charges.
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 Finance Act, 2026.