Taxation and Other Laws (Amendment) Bill, 2026 Introduced in Lok Sabha
 

The Government has proposed a series of tax and regulatory amendments through the Taxation and Other Laws (Amendment) Bill, 2026, introduced in the Lok Sabha. The Bill seeks to replace the Income-Tax (Amendment) Ordinance, 2026. It introduces several measures aimed at enhancing tax certainty, facilitating foreign investment, supporting India’s manufacturing ecosystem, promoting IFSC and fund management activities, and aligning tax provisions with the Government’s broader economic objectives.

Key Amendments

Existing Provision	Proposed Change	Impact
Schedule 1- Eligible Investment Fund (EIF) Regime - Schedule I contains the conditions that offshore investment funds must satisfy to ensure that fund management activities undertaken by an eligible fund manager in India do not result in a taxable business connection in India. The existing regime prescribed multiple eligibility conditions to qualify as EIF.	The Schedule is proposed to be replaced, retaining only key eligibility, fund manager and reporting conditions while removing several detailed requirements.	The amendment substantially reduces compliance burden and provides greater tax certainty for offshore funds. It is expected to make India a more attractive location for fund management activities and indirectly support the GIFT IFSC ecosystem.
Schedule IV - Sl. No. 13A (Capital Goods / Equipment for Electronics Manufacturing) - This provision grants tax exemption to foreign companies that provide capital goods, equipment, or tooling to Indian contract manufacturers engaged in electronics manufacturing, without transferring ownership of such assets. The exemption available up to Tax Year 2030-31.	The exemption period proposed to be extended up to Tax Year 2040-41. The Bill also introduces a specific definition of “specified electronic goods”.	Provides long-term certainty to multinational electronics manufacturers and strengthens India’s position as a global electronics manufacturing hub.
Schedule IV - Sl. No. 13C (Data Center Services) - This exemption applies to income earned by foreign companies from procuring data center services from eligible Indian data centers. The foreign company and the specified data center were required to be notified by the Government. Further, the data center had to be owned and operated by an Indian company.	Notification requirements for both the foreign company and the data center are proposed to be removed. Additionally, data centers operated through a lease model by an Indian company will also qualify.	Reduces regulatory approvals, improves ease of doing business and broadens the scope of eligible data center arrangements.
Schedule IV - New Sl. No. 13F (Rough Diamond Trading) - The amendment seeks to create a tax exemption framework for foreign diamond mining and trading companies conducting rough diamond transactions through India’s Special Notified Zones (SNZs).	Exemption proposed for income from sale of rough diamonds by eligible foreign entities in notified Special Notified Zones up to 31 March 2041.	Expected to attract global diamond trade flows to India and support the development of Mumbai and Surat as international rough diamond trading hubs.
Schedule IV - New Sl. No. 13G (Storage of Components in Customs Bonded Warehouses) - This provision aims to facilitate global electronics manufacturers that store components in India before supplying them to contract manufacturers.	A tax exemption is proposed for foreign companies storing components in customs bonded warehouses for supply to contract manufacturers producing specified electronic goods. The exemption is available up to 31 March 2041.	Strengthens electronics supply chains, encourages warehousing and inventory hubs in India and supports manufacturing sector growth.
Schedule V - Dividend income distributed through a business trust was not exempt if the SPV had opted for the concessional tax regime.	The restriction relating to dividends from SPVs opting for the new tax regime is proposed to be removed.	Improves tax efficiency for SPV investors and enhances the attractiveness of business trust structures.
Section 3 of the Finance Act, 2026 - Domestic companies opting under new tax regime were subject to a surcharge of 10%.	A separate category is proposed for SPVs of business trusts. Such SPVs would be subject to a surcharge of 25%, while other domestic companies continue to be subject to 10% surcharge.	Serves as a balancing measure for the dividend exemption granted to business trust investors and increases the tax cost at the SPV level.