Taxation and Other Laws (Amendment) Bill Tabled In Lok Sabha To Attract Foreign Investment And Boost Manufacturing

New Delhi, Aug 5 (KNN) The government on Tuesday introduced the Taxation and Other Laws (Amendment) Bill, 2026, in the Lok Sabha, proposing a series of tax and regulatory changes aimed at attracting foreign investment, strengthening domestic manufacturing and improving ease of doing business.

The Bill, introduced by Finance Minister Nirmala Sitharaman, seeks to amend the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025, and the Finance Act, 2026. It will also replace the Income-tax (Amendment) Ordinance, 2026.

Context: Global Uncertainty

In a statement accompanying the Bill, Sitharaman cited evolving geopolitical developments and disruptions in global trade and supply chains as key reasons for the proposed changes. 

The measures aim to mitigate external economic shocks, ensure domestic stability and support sectors affected by global uncertainties.

Support for Electronics Manufacturing

In a boost to the Make in India initiative, the Bill proposes extending by 10 years the tax exemption for foreign companies supplying machinery and tools to Indian electronics manufacturers, taking the total benefit period to 15 years or until FY2041.

It also clearly defines eligible electronic goods, including mobile phones, laptops, personal computers, tablets, servers and related components, to reduce ambiguity and encourage long-term investments.

Additionally, a full 15-year tax exemption is proposed for foreign companies storing electronic components in customs bonded warehouses for supply to domestic manufacturers, replacing the current presumptive taxation regime.

Easing Rules for Offshore Funds

The Bill proposes to simplify tax rules for offshore investment funds managed from India by retaining only essential safeguards against misuse. This is intended to encourage global fund managers to operate from India without the risk of their funds being treated as having a taxable presence.

The provisions will apply across the country, including the International Financial Services Centre (IFSC), offering flexibility in operational choices.

Relief for REIT and InvIT Investors

The legislation seeks to restore tax exemption on dividends received by investors in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), even if the underlying entities opt for the new tax regime.

To maintain revenue neutrality, an additional surcharge will be imposed on the underlying special purpose vehicles instead of taxing investors. The move is aimed at protecting retail investors while supporting investments in real estate and infrastructure.

Push for Data Centres and Digital Investment

To attract foreign participation in the data centre sector, the Bill proposes removing the requirement for separate government notifications for foreign cloud companies and Indian data centres. 

It also allows leased data centre models, instead of restricting operations to owned infrastructure, with compliance limited to reporting requirements.

Next Steps

The proposed amendments will come into effect after Parliamentary approval. The government expects the measures to improve policy predictability, enhance investment flows and support key sectors amid a changing global economic environment.

(KNN Bureau)