The Centre on Tuesday introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha, presenting a wide-ranging package of tax reforms
aimed at attracting investment, strengthening domestic manufacturing, improving tax certainty and replacing the Income-tax (Amendment) Ordinance, 2026. The proposed legislation seeks 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 designed to help the economy navigate global uncertainties while making India's tax framework more predictable and business-friendly. The government said the proposed amendments come at a time when geopolitical tensions, supply chain disruptions and shifts in global trade continue to pose challenges to economies worldwide. The objective is to reduce the impact of these external pressures, safeguard domestic economic stability and extend support to sectors affected by the changing global environment. The legislation also seeks to strengthen investor confidence by providing greater tax certainty and simplifying compliance requirements, thereby improving the overall ease of doing business in the country. Simpler Rules For Offshore Funds Among the key proposals is a revision of the tax framework governing eligible offshore investment funds and eligible fund managers. The Bill aims to streamline the provisions under the Income-tax Act, 2025 by easing compliance requirements while retaining essential safeguards. The move is expected to encourage more fund management activity to be carried out from India and provide greater certainty for international investors. The Bill also proposes extending tax incentives available to the electronics manufacturing sector. Tax exemptions for foreign companies supplying capital goods, machinery and tooling to Indian contract manufacturers of specified electronic products would continue until the tax year ending March 31, 2041, instead of expiring after the 2030-31 tax year. In addition, the scope of eligible electronic products has been widened. Apart from existing categories, it now includes laptops, tablets, servers, hearables, wearables and related accessories, broadening the coverage of the incentive scheme. Relief For Foreign Investors, Diamond Trade And Business Trusts The proposed legislation introduces fresh tax exemptions for foreign investors holding government securities. Interest income and capital gains arising from the sale, exchange or transfer of these securities would be exempt for Foreign Institutional Investors (FIIs) and the Bank for International Settlements, subject to prescribed reporting requirements. Another proposal seeks to strengthen India's position in the global diamond trade. Eligible foreign diamond mining companies, sight holders, brokers, aggregators and auction entities would receive tax exemptions on income from rough diamond sales conducted through notified special zones until March 31, 2041. The Bill also removes an existing restriction affecting business trusts. Under the proposal, unit holders would continue to receive tax-exempt dividends even if the special purpose vehicle (SPV) distributing those dividends has opted for the new tax regime. Changes To Digital Payments Law, Ordinance To Be Replaced Beyond direct taxation, the Bill proposes amendments to the Payment and Settlement Systems Act, 2007. It seeks to remove references to the Income-tax Act from provisions dealing with electronic payment modes and authorises the Central Government to notify digital payment methods on which banks or payment system providers cannot impose charges. The legislation also seeks to repeal the Income-tax (Amendment) Ordinance, 2026, while validating all actions already taken under it. The government said the new Bill is intended to replace the Ordinance through an Act of Parliament and incorporate additional taxation measures that emerged following stakeholder consultations after the enactment of the Finance Act, 2026.
