Lok Sabha Passes the Taxation and Other Laws (Amendment) Bill, 2026: A Game Changer for Investment and Supply Chains
NEW DELHI: In a significant move to enhance India’s economic landscape, the Lok Sabha has successfully passed the Taxation and Other Laws (Amendment) Bill, 2026. This groundbreaking legislation aims to attract foreign investment, boost domestic manufacturing, and provide essential tax clarity, effectively replacing the Income-tax (Amendment) Ordinance, 2026.
Overview of the Taxation Bill
The Taxation and Other Laws (Amendment) Bill, 2026 amends several key legislative acts, including the Income-tax Act, 2025, the Finance Act, 2026, and the Payment and Settlement Systems Act, 2007. These amendments are crafted in response to shifting geopolitical dynamics and disruptions in global trade and supply chains.
Strategic Focus and Global Relevance
The amendments introduced in this Bill are designed to safeguard the Indian economy against external shocks, bolster sectors impacted by global conditions, and improve the overall ease of doing business. The Finance Ministry emphasizes that these changes will position India as a reliable and attractive destination for global capital, manufacturing, and enterprise.
Key Amendments and Sector-Specific Reforms
The Taxation Bill introduces various significant reforms that target multiple sectors:
- Offshore Funds:
- Simplified tax framework for eligible offshore investment funds and fund managers.
- Reduced compliance requirements while maintaining safeguards against misuse.
- Foreign Institutional Investors (FIIs) and BIS:
- Tax exemptions on interest income and capital gains from government securities, subject to regulatory requirements.
- Electronics Manufacturing:
- Extension of tax exemptions until March 31, 2041, for foreign firms supplying capital goods to Indian electronic goods manufacturers.
- Expanded list of exempted products includes laptops, tablets, and wearables.
- Strengthening Supply Chains:
- 15-year income tax exemption for foreign companies storing electronic components in customs-bonded warehouses for Indian manufacturers.
- Enhancing Digital Infrastructure:
- Removal of approval requirements for foreign cloud companies using Indian data centres, facilitating a more agile data service environment.
- Promoting the Diamond Trade:
- Tax exemptions extended until March 31, 2041, for eligible foreign diamond firms involved in rough diamond sales.
- Reforming Business Trusts (REITs/InvITs):
- Lifting tax exemption restrictions on dividends received by unit holders, leveling the tax landscape for special purpose vehicles (SPVs).
- Innovating Payment Systems:
- Amendments empower the Centre to notify electronic payment modes exempt from bank charges, expanding payment method options.
Legislative Intent and Stakeholder Response
“The Government’s intent behind the Taxation and Other Laws (Amendment) Bill, 2026 is commendable: by exempting FII/BIS income on government securities, extending capital‑goods relief, and carving out targeted exemptions for electronics and diamond value chains, it signals a clear push to attract foreign capital and deepen domestic manufacturing. The relaxations for data‑centre services and for overseas funds managed from India further underscores a forward‑looking approach to frontier infrastructure and fund domiciliation. However, few of these provisions may have limited practical utility where applicable tax treaties already govern taxation in a more liberal fashion.” — Himanshu Sinha, Partner- Tax Practice, Trilegal
Conclusion
With the passage of the Taxation and Other Laws (Amendment) Bill, 2026, India takes a significant step towards becoming a global hub for investment and manufacturing. The reforms aim to create a more predictable business environment while reinforcing sectoral growth, particularly in electronics, financing, and digital infrastructure. As these changes unfold, their impact will be closely monitored by industry stakeholders and global investors alike.
About Himanshu Sinha, Partner – Tax, Direct Taxes | Transfer Pricing | Restructurings and Exits:
Himanshu Sinha is a Partner in the Delhi office of Trilegal and leads the firm’s Tax practice. He has over 20 years of experience representing diverse clients on a swathe of tax issues. His specialisation is in direct taxes – both advisory and controversial aspects. He advises clients across industries such as trading, manufacturing, financial services, education, telecom and media, oil and gas, aerospace and defence and technology services on Indian tax aspects of international M&A deals, inbound and outbound investments, restructurings and exits.
During his early 14-year stint with the Indian Revenue Service, Himanshu contributed significantly to the evolution of the country’s transfer pricing laws and procedures. He has extensive experience in managing complex tax controversies, especially in transfer pricing and international tax. He regularly represents MNC clients before courts, tribunals and authorities in high-stake litigation and negotiations. Many of the cases argued by Himanshu appear in law reports. He is actively engaged in negotiating Advance Pricing Agreements with the Government on behalf of global companies. He advises clients on audit and litigation strategies and regularly defends directors and company officials in tax investigations and prosecutions.
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