Finance Minister Nirmala Sitharaman on Tuesday introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha, seeking to amend several existing Acts in a bid to attract more foreign capital, make it easier to do business in India, and to push the Make in India mission.
The Taxation and Other Laws (Amendment) Bill, 2026 will amend the Payment and Settlement Systems Act, 2007, Income-tax Act, 2025, and the Finance Act, 2026.
In particular, the main changes have to do with extending existing tax holidays for companies such as Apple that supply machinery and tooling to Indian factories, providing certainty and reducing red tape for foreign fund managers looking to relocate to India, and easing the process for foreign companies to set up data centres in India.
“The proposals in the Bill share a single purpose — to make India a more attractive and predictable place for global capital, manufacturing and business to come and stay,” a source in the Ministry of Finance said on the condition of anonymity because the government must first officially talk about the legislation in Parliament while it is in session.
Electronics and data data centres to gain
Under the Income Tax Act 2025, a foreign company that supplies capital goods, equipment, or tooling equipment to an Indian factory that makes electronics on its behalf does not have to pay income tax on what it is paid for these goods. The time limit for this exemption was set as five years.
The Bill proposes to extend this exemption by another ten years — up to 2040-41. It also clearly defines the electronic goods covered under the provisions such as mobile phones, laptops, personal computers, tablets, servers, wearables, and their key parts and accessories.
It also proposes a key tax exemption for data centres in India.
“Foreign cloud companies that use Indian data centres were earlier promised a tax exemption, but with conditions of clearing several layers of government notification and approval,” the official explained.
The proposed Bill seeks to remove these approval requirements. In addition, it will allow Indian data centres to be run on a leased basis rather than only under direct ownership.
“The result is a much larger and more flexible ecosystem of Indian data centres serving global cloud players,” the official said.
Easing rules for fund managers
“Global investment funds are typically run by skilled fund managers, and India has deep talent in this field,” the official further explained. “Until now, a long and demanding list of conditions discouraged those managers from basing themselves in India, for fear that doing so might make the entire foreign fund taxable here.”
The proposed Bill seeks to slash this list of conditions, retaining only those that are expressly aimed at preventing misuse and roundtripping of money by Indians. Under the proposed rules, fund managers will be allowed to relocate to India without the foreign fund being treated as doing business in India.
“The expectation is that many managers of global funds will move to India, bringing high value activity and jobs with them,” the official said.
Tax benefits for investment trusts
The new Bill also proposes to restore a key tax exemption that had been provided to Real Estate Investment Trusts (REITS) and Infrastructure Investment Trusts (InvITs), but had been withdrawn under the new tax regime.
Dividends paid by REITs and InvITs to their investors were tax free only if the operating company stayed in the old tax regime. However, as companies increasingly move to the new tax regime, investors risked losing this benefit.
The Bill introduced on Tuesday seeks to restore this exemption so that investors continue to receive their dividends tax free even after the operating company shifts to the new regime.
“To keep the change revenue neutral, a modest additional charge is levied at the level of the operating company rather than on the investor,” the official explained. “This protects small investors and gives a further push to investment in real estate and infrastructure.”
Published – August 04, 2026 04:20 pm IST
