{"id":117037,"date":"2026-08-04T11:13:28","date_gmt":"2026-08-04T05:43:28","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=117037"},"modified":"2026-08-04T11:26:19","modified_gmt":"2026-08-04T05:56:19","slug":"taxation-amendment-bill-2026","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/taxation-amendment-bill-2026\/","title":{"rendered":"Taxation and Other Laws (Amendment) Bill, 2026 &#8211; Explained"},"content":{"rendered":"<h2 style=\"text-align: justify;\"><strong>Taxation Latest News<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The Government has proposed several tax reforms through the <\/span><b>Taxation and Other Laws (Amendment) Bill, 2026<\/b><span style=\"font-weight: 400;\">, including relaxation of tax rules for offshore funds, extension of tax incentives for electronics contract manufacturing, and new exemptions for data centres and foreign investors.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Background<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">In recent years, India has introduced a series of tax reforms to attract global investments, strengthen domestic manufacturing, and position itself as a preferred destination for international fund management.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">However, industry stakeholders have argued that certain provisions under the Income-tax Act imposed restrictive conditions on offshore investment funds and created uncertainty for multinational companies operating in sectors such as electronics manufacturing and data centres.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Following representations from industry and in view of evolving global economic conditions, the Government has proposed amendments through the <\/span><b>Taxation and Other Laws (Amendment) Bill, 2026<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The proposed changes aim to simplify the tax framework, improve ease of doing business, enhance India&#8217;s competitiveness, and support key sectors such as electronics, financial services, mining, and digital infrastructure.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Key Highlights of the Proposed Tax Reforms<\/strong><\/h2>\n<ul>\n<li aria-level=\"1\"><b>Relaxation of Tax Conditions for Offshore Funds<\/b>\n<ul>\n<li><span style=\"font-weight: 400;\">The Bill proposes significant changes to the taxation framework governing Eligible Investment Funds (EIFs) or offshore funds managed from India.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">At present, offshore funds are required to satisfy 13 conditions to ensure that their fund management activities in India do not constitute a taxable business presence.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The proposed amendments remove 8 out of these 13 conditions, thereby substantially easing compliance requirements.<\/span><\/li>\n<\/ul>\n<\/li>\n<li aria-level=\"1\"><b>Conditions Proposed to be Removed<\/b>\n<ul>\n<li><span style=\"font-weight: 400;\">Minimum 25 investors in the fund.\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Maximum 10% participation interest by a single investor.\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Restriction on investing more than 25% of the corpus in a single entity.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Restriction on investments in associate entities.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Minimum monthly average corpus requirement of \u20b9100 crore.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Other structural conditions which are considered inconsistent with global fund management practices.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Experts have observed that these provisions were not aligned with international fund structures and often discouraged offshore funds from locating their fund management operations in India.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>After the proposed amendments, offshore funds will primarily be required to satisfy only five key conditions:<\/b><\/li>\n<li style=\"list-style-type: none;\">\n<ul>\n<li><span style=\"font-weight: 400;\">The fund should not be a resident of India.\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The fund should not directly or indirectly control or manage any business in India.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Investment by Indian residents should not exceed <\/span><b>5% of the corpus<\/b><span style=\"font-weight: 400;\"> as on <\/span><b>1 April<\/b><span style=\"font-weight: 400;\"> and <\/span><b>1 October<\/b><span style=\"font-weight: 400;\"> of the relevant financial year.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The revised framework is also expected to create greater uniformity between offshore funds operating in India and those located in the <\/span><b>International Financial Services Centre (IFSC)<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Extension of Tax Incentives for Electronics Contract Manufacturing<\/strong><\/h2>\n<ul>\n<li><span style=\"font-weight: 400;\">The Bill proposes to extend the tax exemption available to foreign companies supplying capital goods, machinery, equipment, or tooling to Indian electronics contract manufacturers.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The tax exemption, which was earlier available until <\/span><b>2030-31<\/b><span style=\"font-weight: 400;\">, is proposed to be extended by <\/span><b>ten years<\/b><span style=\"font-weight: 400;\">, up to <\/span><b>2040-41<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The proposal is expected to benefit global electronics companies, particularly those adopting the contract manufacturing model in India, by providing long-term tax certainty and encouraging greater investment in domestic manufacturing.<\/span><\/li>\n<li aria-level=\"1\"><b>The Bill also introduces a new tax exemption for foreign companies involved in:<\/b>\n<ul>\n<li><span style=\"font-weight: 400;\">Storage of electronic components in customs-bonded warehouses.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Sale of such components to Indian contract electronics manufacturers.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The measure seeks to strengthen India&#8217;s electronics manufacturing ecosystem by facilitating smoother supply chains and reducing tax-related uncertainties for multinational firms.<\/span><\/li>\n<\/ul>\n<\/li>\n<li aria-level=\"1\"><b>Tax Relief for Data Centres<\/b>\n<ul>\n<li><span style=\"font-weight: 400;\">Recognising the rapid expansion of India&#8217;s digital economy, the Bill proposes several measures to promote investment in data centre infrastructure.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The proposed amendments include:<\/span>\n<ul>\n<li><span style=\"font-weight: 400;\">Expanding the definition of an <\/span><b>eligible data centre<\/b><span style=\"font-weight: 400;\"> to include facilities operated through both <\/span><b>ownership and leasing<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Removing the requirement for a separate Central Government notification for foreign companies procuring data centre services from specified facilities in India.\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">These measures are expected to reduce procedural hurdles and align the tax framework with prevailing commercial practices in the sector.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li aria-level=\"1\"><b>Tax Holiday for Diamond Trading Entities<\/b>\n<ul>\n<li><span style=\"font-weight: 400;\">To strengthen India&#8217;s position in the global diamond trade, the Bill proposes a 15-year tax holiday, extending up to 31 March 2041, for specified foreign companies operating in notified special zones.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The proposed exemption will apply to entities engaged as:<\/span>\n<ul>\n<li><span style=\"font-weight: 400;\">Mining companies\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Sightholders\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Brokers\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Aggregators\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Tender or auction entities\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li><span style=\"font-weight: 400;\">The exemption covers income earned from the sale of rough diamonds within the notified special zone.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Replacement of the Income-tax (Amendment) Ordinance, 2026<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The Bill also seeks to replace the <\/span><b>Income-tax (Amendment) Ordinance, 2026<\/b><span style=\"font-weight: 400;\">, which was promulgated on <\/span><b>5 June 2026<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The Ordinance had provided tax relief to <\/span><a href=\"https:\/\/vajiramandravi.com\/upsc-exam\/foreign-portfolio-investment-fpi\/\" target=\"_blank\"><b>Foreign Portfolio Investors<\/b><\/a><b> (FPIs)<\/b><span style=\"font-weight: 400;\"> by exempting:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Capital gains on investments in Government securities.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Withholding tax on such investments.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">According to the Government, the Ordinance was introduced to:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Mitigate the impact of external economic shocks.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Support domestic economic stability.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Encourage foreign capital inflows.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The proposed Bill seeks to incorporate these provisions into permanent legislation while introducing additional tax measures based on stakeholder feedback received after the enactment of the <\/span><b>Finance Act, 2026<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Significance of the Proposed Reforms<\/strong><\/h2>\n<ul>\n<li style=\"font-weight: 400; text-align: justify;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The proposed amendments are expected to:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Position India as a more attractive destination for global fund management.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Enhance the competitiveness of the <\/span><b>IFSC<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Provide long-term policy certainty to electronics manufacturers.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Promote investment in data centres and digital infrastructure.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Encourage foreign investment in Government securities.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Strengthen India&#8217;s role in global value chains.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400; text-align: justify;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Collectively, these measures align with broader government initiatives such as <\/span><b>Make in India<\/b><span style=\"font-weight: 400;\">, <\/span><b>Digital India<\/b><span style=\"font-weight: 400;\">, and efforts to improve the country&#8217;s ease of doing business.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b> <strong><a href=\"https:\/\/www.thehindu.com\/business\/Economy\/government-proposes-to-ease-tax-relief-conditions-for-offshore-funds\/article71301421.ece\" target=\"_blank\" rel=\"nofollow noopener\">TH<\/a> | <a href=\"https:\/\/indianexpress.com\/article\/business\/government-proposes-tax-relief-for-offshore-funds-electronics-contract-manufacturing-10816610\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Taxation and Other Laws (Amendment) Bill, 2026 proposes tax relief for offshore funds, electronics contract manufacturing and data centres.<\/p>\n","protected":false},"author":21,"featured_media":117058,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[60,9230,22,59],"class_list":["post-117037","post","type-post","status-publish","format-standard","has-post-thumbnail","category-upsc-mains-current-affairs","tag-mains-articles","tag-taxation","tag-upsc-current-affairs","tag-upsc-mains-current-affairs-tag","no-featured-image-padding"],"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/117037","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/21"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=117037"}],"version-history":[{"count":3,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/117037\/revisions"}],"predecessor-version":[{"id":117073,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/117037\/revisions\/117073"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/117058"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=117037"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=117037"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=117037"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}