India to introduce Taxation and Other Laws (Amendment) Bill, 2026 with investor and manufacturing tax relief

New Delhi: The government is preparing to introduce the Taxation and Other Laws (Amendment) Bill, 2026, during the ongoing session of Parliament. The proposed law aims to attract foreign investment and support domestic manufacturing.Wider Tax ReliefAccording to a Bloomberg report, the Bill may offer tax benefits to foreign investors putting money into Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), data centres and government bonds.It may also simplify rules for overseas investment funds operating in India. The government hopes these steps will make the country a more attractive destination for global capital and strengthen economic growth.Foreign suppliers providing products or components to Indian electronics manufacturers could also receive extended tax exemptions. Similar benefits may be considered for data centres and companies involved in diamond mining.Manufacturing PushOne of the major proposals is to extend the tax benefit available for contract manufacturing from its current expiry in 2031 to 2041.The extension could cover electronic products such as mobile phones, laptops, tablets and servers. This may encourage global companies to expand their supply chains and production operations in India.Union Budget 2025-26: Finance Minister Nirmala Sitharaman Unveils Reforms For Taxation, Urban Development, & More Investors May BenefitThe government is reportedly considering converting an existing ordinance into a permanent law. It provides foreign institutional investors with tax exemptions on interest earned from certain government securities.The exemption may also cover capital gains arising from the sale or transfer of these securities.These measures are aimed at slowing foreign fund outflows, supporting the rupee and protecting the economy from external shocks, including uncertainty following the US-Iran conflict.Govt Needs Money To Meet Challenges, Fund R&D, Finance Minister Nirmala Sitharaman Justifies New Taxation Regime At IISER ConvocationIf approved, the proposals could improve foreign investor confidence and support the Indian stock market. However, any market impact will depend on global conditions and investor sentiment.Time Running OutFinance Minister Nirmala Sitharaman may introduce the Bill before the parliamentary session ends on August 13.However, proceedings have faced disruption over opposition demands for discussions on examination paper leaks and student protests. With limited time remaining, the government may face challenges in securing Parliament’s approval for the proposed tax measures during this session.

New Delhi: The government is set to unveil a sweeping tax policy reset, extending incentives for manufacturing and relaxing rules for foreign investment funds through the proposed Taxation and Other Laws (Amendment) Bill, 2026.The bill is likely to extend exemptions for contract manufacturing of "specified electronic goods" until 2040-41. Mobile phones, laptops, tablets, servers, wearables and related components are likely to be included in the list, people aware of the development told ET.Also Read: Auto PLI disbursals to reach Rs 4,000 crore in FY27Foreign companies storing electronic components in customs bonded warehouses could also benefit from tax relief until FY2040-41, a move aimed at strengthening supply chains and supporting India's ambitions as an electronics manufacturing hub.The bill seeks to replace the Income Tax Ordinance of June, while relaxing several conditions viewed as hurdles for global fund managers, including requirements linked to investor numbers, minimum corpus, investment diversification and restrictions on investments in associate entities.132841056Making Sovereign Debt AttractiveIt also proposes to provide tax exemption for interest income and capital gains from government securities held by foreign institutional investors and the Bank for International Settlements. The exemption is expected to improve the attractiveness of Indian sovereign debt instruments for international investors.The bill proposes to restore tax exemption on dividend incomes of real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).Also Read: Rejig of global tax reporting rules to cover digital financeThe proposed amendments also seek to provide relief to India's growing digital infrastructure sector by easing tax rules for leased data centres operated by Indian companies. The bill proposes changes to the exemption relating to foreign companies procuring data centre services from specified data centres.The requirement for the foreign company to be notified by the central government has been removed. The definition of a specified data centre has also been amended to include a data centre operated by an Indian company, whether through ownership or leasing, subject to prescribed conditions.132841058The bill proposes a long-term exemption for foreign companies involved in rough diamond sales through notified special zones, covering diamond mining companies, sightholders, brokers, aggregators and auction entities.It proposes a higher 25% surcharge for special purpose vehicles (SPVs) opting for the new corporate tax regime, compared with 10% for other domestic companies.The bill is likely to be tabled in Lok Sabha this week.It proposes to delink zero charge electronic payments from a specific provision of the Income Tax Act. Instead, the Centre would have the power to notify eligible electronic payment modes directly under the Payment and Settlement Systems Act, allowing faster policy changes.Experts said the exemption is expected to improve the attractiveness of Indian sovereign debt instruments for international investors."Taken together, the amendments reflect an effort to combine economic stability with investment facilitation," said Richa Sawhney, partner, tax, at Grant Thornton. "The measures are designed not only to address immediate challenges arising from global uncertainties, but also to provide a more predictable tax framework for businesses and investors operating in strategic sectors."