What Just Happened
The Taxation and Other Laws (Amendment) Bill, 2026 was introduced in the Lok Sabha on 4 August 2026, cleared the Rajya Sabha on 11 August 2026, and received the President’s assent on 13 August 2026. It has now become law. The Bill amends the Income-tax Act, the Finance Act, 2026, and the Payment and Settlement Systems Act, 2007, and formally repeals and replaces the Income-tax (Amendment) Ordinance, 2026 that was issued on 5 June 2026.
Why the Bill Was Needed
Parliament’s stated aim was to make India more attractive for foreign investment, support domestic manufacturing, and ease compliance for global businesses operating here. Several provisions had first been introduced through an ordinance in June and needed parliamentary ratification within the constitutionally mandated window, which is why the Bill moved through both Houses quickly during the Monsoon Session.
Key Changes for Foreign Investment and Manufacturing
The tax exemption available to foreign companies engaged in electronics manufacturing through Indian contract manufacturers has been extended up to FY 2040-41. The same benefit now also covers foreign companies that store components in customs-bonded warehouses for supply to domestic manufacturers. Separately, a 15-year tax holiday has been introduced for foreign companies operating in the rough diamond trade within notified special zones, aimed at building India’s position as a diamond processing hub.
Simplified Rules for Offshore Funds and Data Centres
Offshore investment funds will now need to satisfy only 5 compliance conditions instead of the earlier 13, retaining core safeguards while easing the path for fund managers to operate from India. Foreign companies using Indian data centres also get simplified taxation rules the requirement that the company be specifically notified by the central government, and that the data centre be set up under an approved scheme, has been removed. Foreign Institutional Investors and the Bank for International Settlements will get income tax exemptions on interest and capital gains from government securities.
The Digital Payments Angle
One provision has drawn particular attention: the Bill amends the Payment and Settlement Systems Act, 2007 to remove references to the Income-tax Act in the provisions governing electronic payment modes. This changes how the government can regulate charges on electronic payment modes such as UPI, and several reports have flagged it as potentially opening the door to charges on transactions that are currently free. No such charge has been notified yet this is a structural change to the law, not an announced fee.
What This Means for You
If you’re a business owner, especially one dealing with foreign investment, contract manufacturing, or fund structures, these changes could open up new planning opportunities but also come with new conditions to track. If you accept digital payments, it’s worth watching for any follow-up notifications on payment charges. As with any newly enacted law, the practical impact will depend on rules and notifications issued under it in the coming months.
This post is for general informational purposes and does not constitute tax advice. Please consult us directly for guidance specific to your situation.