The Lok Sabha on Thursday passed the Taxation and Other Laws (Amendment) Bill, 2026, which proposes a slew of tax concessions aimed to attract foreign investment, support domestic manufacturing, and make India a more predictable place for global capital.
The Bill, which amends the Income Tax Act, 2025, offers extended tax holidays for contract manufacturers and warehouses of electronic goods. It also eases conditions for foreign companies to operate data centres from India, and for India-domiciled foreign funds to avail tax exemption on their global income.
Introduced in the Lok Sabha on Tuesday, the Bill also amends the Payment and Settlement Systems Act, 2007, paving the way for the levy of merchant discount rate (MDR) on UPI and RuPay debit card transactions.
“Extended tax holiday period for electronic goods manufacturers and relaxed eligibility conditions for data centres ought to enable investors to commit long term capital into these sectors,” said Sumit Singhania, partner, Deloitte India.
The Bill simplifies the process for foreign companies to run data centres in India, allowing Indian data centres to be run on a leased basis rather than only under direct ownership. While foreign cloud companies using Indian data centres were already promised a tax exemption until 2047, the new amendment removes the need for government approval.
To boost manufacturing in India, the Bill proposes an additional 10 years of tax breaks for foreign companies providing capital goods and machinery to contract manufacturers and warehouses in the electronics sector until March 2041. This move is seen as benefiting Big Tech companies, including Apple and Google, looking to increase manufacturing in India.
Once passed by Parliament, the bill will make it easier for a fund manager to relocate to India without the foreign fund being treated as doing business in India.
“Besides, rationalisation of tax immunity rules for foreign fund managers is both a symbolic as well as major step forward towards providing a transparent and reliable tax framework for foreign funds looking to leverage India as their global operations hub,” Singhania said.
The Bill also provides a tax holiday until March 2041 on the sale of rough diamonds for foreign diamond mining companies and related entities.
To bring tax neutrality, the Bill proposes tax exemption for unit holders of real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) on dividends received, even if the special purpose vehicle (SPV) has opted for the new tax regime. To stem the revenue loss from this change, the Bill proposes raising the surcharge on SPVs opting for the new tax regime to 25% from 10%.