Lok Sabha Clears Taxation and Other Laws (Amendment) Bill; Push For Foreign Investment And Manufacturing

New Delhi, Aug 7 (KNN) The Lok Sabha on Thursday passed the Taxation and Other Laws (Amendment) Bill, 2026, without debate. The legislation aims to attract foreign investment, support domestic manufacturing, and provide greater clarity in tax rules. It will replace the Income-tax (Amendment) Ordinance, 2026.

Key Objectives 

The Bill introduces amendments to the Income-tax Act, 2025, the Finance Act, 2026, and the Payment and Settlement Systems Act, 2007. 

According to the government, the changes are in response to shifting global economic conditions, including geopolitical developments and disruptions in trade and supply chains. The measures are intended to reduce the impact of external shocks, support affected sectors, and improve ease of doing business.

A major provision simplifies tax rules for offshore investment funds and fund managers by reducing compliance requirements while keeping safeguards in place. The government expects this to encourage global fund managers to operate from India.

Measures to Promote Investment and Manufacturing

The Bill offers tax exemptions on interest income and capital gains from government securities for Foreign Institutional Investors and the Bank for International Settlements, subject to reporting norms.

To boost electronics manufacturing, tax benefits for foreign companies supplying equipment to Indian manufacturers have been extended until March 31, 2041. The scope of eligible products has also been widened to include items such as laptops, tablets, servers, and wearable devices.

Additionally, foreign companies storing electronic components in bonded warehouses for supply to Indian manufacturers will receive a 15-year income tax exemption, aimed at strengthening supply chains.

Digital Infrastructure and Other Reforms

The legislation removes approval requirements for foreign cloud companies using Indian data centres and allows such facilities to operate on a leased basis. It also empowers the government to specify digital payment modes on which no charges can be imposed by banks or service providers.

Further, tax exemptions for foreign entities involved in the diamond trade in notified zones have been extended until March 31, 2041, to strengthen India’s role in the global market.

Changes for Business Trusts

For business trusts such as REITs and InvITs, the Bill removes restrictions on dividend-related tax exemptions for unit holders in certain cases. A corresponding tax adjustment at the entity level has been introduced to maintain revenue balance.

(KNN Bureau)