Tax Amendment Bill 2026 Opens Door for Big Boost to Electronics Global Investors Data Centres and Digital Payments

The Taxation and Other Laws (Amendment) Bill, 2026, introduced by Finance Minister Nirmala Sitharaman in the Lok Sabha, proposes major tax changes to attract foreign investment, support Indian manufacturing, simplify business rules and promote digital payments. The Bill seeks to amend the Income-tax Act, 2025, the Finance Act, 2026, and the Payment and Settlement Systems Act, 2007, while replacing the earlier Income-tax Amendment Ordinance, 2026.

A major focus of the Bill is to strengthen India’s electronics manufacturing sector. Foreign companies that provide machinery, equipment, capital goods or tooling to Indian contract manufacturers will get tax exemption for a longer period. This benefit, earlier available up to 2030-31, is proposed to be extended by 10 more years up to 2040-41. The aim is to encourage global companies to manufacture more electronic goods in India.

The Bill also expands the list of electronic goods covered under the benefit. It includes mobile phones, laptops, all-in-one computers, tablets, servers, ultra-small form factor devices, sub-assemblies, wearables, hearables and related accessories. This shows that the government is not only focusing on mobile phones but also wants India to become a bigger hub for computers, servers and modern electronic devices.

Another important change supports foreign companies that store electronic components in customs-bonded warehouses in India. If these components are supplied to Indian contract manufacturers for producing specified electronic goods, the foreign company can get tax exemption on income from the sale of such components. This benefit is proposed to be available up to 31 March 2041, helping India build a stronger electronics supply chain.

The Bill also makes rules easier for foreign cloud companies and Indian data centres. Earlier, the foreign company and the Indian data centre had to be specifically notified by the Central Government to claim tax benefits. This requirement is now proposed to be removed. Indian data centres operating on leased infrastructure will also be allowed, instead of limiting the benefit only to data centres owned and operated by Indian companies.

Global fund managers will also benefit from the proposed changes. At present, eligible foreign investment funds have to meet 13 conditions so that their fund management activity in India does not create an adverse tax presence. The Bill proposes to reduce these conditions to only five. This simplification is aimed at encouraging more global fund managers to relocate or operate from India with better tax certainty.

The Bill provides relief to investors in business trusts such as REITs and InvITs. Unit holders will continue to get tax exemption on dividends received from special purpose vehicles even if those SPVs move to the new tax regime. However, to balance the revenue impact, an additional surcharge of 15% is proposed on such SPVs under the new tax regime.

The diamond industry also gets support under the Bill. Foreign diamond mining companies, sightholders, brokers, aggregators, tender entities and auction entities selling rough diamonds in special notified zones such as Mumbai and Surat can get tax exemption. This benefit is proposed to be available up to 31 March 2041, provided the required conditions are followed.

The Bill also proposes tax relief for Foreign Institutional Investors investing in Indian government securities. Their interest income and capital gains from such investments are proposed to be exempt from tax. A similar benefit is also proposed for the Bank for International Settlements. This move is expected to make Indian government bonds more attractive to foreign investors.

In a major step for digital payments, the Bill proposes that banks and payment system providers cannot charge users for making or receiving payments through electronic modes notified by the Central Government. In simple terms, if the government notifies a digital payment method, banks and payment companies may not be allowed to levy transaction charges on it.

Overall, the Bill is designed to make India more business-friendly by supporting electronics manufacturing, easing rules for global investors, promoting data centres, helping REIT and InvIT investors, supporting the diamond trade, attracting foreign money into government securities and encouraging low-cost digital payments.