The Lok Sabha on Thursday passed the Taxation and Other Laws (Amendment) Bill, 2026, which seeks to amend the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025 and the Finance Act, 2026.
The Bill was approved by voice vote without discussion amid protests by Opposition members over their demands regarding the police action against protesters on July 20.
Moved by Finance Minister Nirmala Sitharaman, the legislation seeks to replace the Income-tax (Amendment) Ordinance, 2026, and introduces a series of tax measures aimed at boosting investment, supporting manufacturing, enhancing tax certainty and improving the ease of doing business.
The government said the amendments have been proposed in view of evolving geopolitical developments and disruptions in global trade with and supply chains, with the objective of mitigating external economic shocks and supporting sectors affected by prevailing global conditions.
Among the key proposals is the rationalisation of conditions for eligible offshore investment funds and eligible fund managers by reducing compliance requirements while retaining core safeguards, with the aim of promoting fund management activity in India and providing greater certainty to global investors.
The Bill also extends tax incentives for electronics manufacturing by continuing tax exemptions for foreign companies supplying capital goods, equipment and tooling to Indian contract manufacturers until the tax year ending March 31, 2041, instead of the earlier deadline of 2030-31. It further expands the list of specified electronic goods to include laptops, tablets, servers, hearables, wearables and related accessories.
To encourage foreign investment in government securities, the legislation proposes exemptions on interest income and capital gains earned by Foreign Institutional Investors (FIIs) and the Bank for International Settlements, subject to prescribed reporting requirements.
In a bid to strengthen India’s position in the global diamond trade, the Bill also proposes tax exemptions until March 31, 2041, for eligible foreign diamond mining companies, sight holders, brokers, aggregators and auction entities on income earned from the sale of rough diamonds through notified special zones.
For business trusts, the Bill removes an existing restriction that denied tax exemption on dividends received by unit holders where the special purpose vehicle had opted for the new tax regime.
Apart from taxation changes, the Bill amends the Payment and Settlement Systems Act, 2007, by removing references to the Income-tax Act in provisions relating to electronic payment modes. It also empowers the Central Government to notify electronic payment modes on which banks or system providers cannot levy charges.
