New Delhi: Finance Minister Nirmala Sitharaman introduced the ‘Taxation and Other Laws (Amendment) Bill, 2026’ in the Lok Sabha on Tuesday. Its objective is to bring more foreign capital into the country, strengthen the manufacturing sector, and foster an environment conducive to ‘Ease of Doing Business’.
The bill seeks to attract global investment funds, cloud businesses, and infrastructure investors to conduct the majority of their operations through India. Its primary aim is to provide certainty through reliable policies and processes. Foreign companies often face uncertainty regarding whether operating in or through India might result in an unintended tax burden. A senior official stated that these proposals outline a path toward a clear, stable, and predictable tax regime.
To facilitate the relocation of fund managers to India, the bill significantly streamlines the list of eligibility criteria. It retains only those conditions necessary to prevent the misuse of funds by Indian residents and to curb ’round-tripping’. It allows fund managers to relocate to India without the foreign fund itself being deemed as carrying on business within the country. The bill also restores tax exemptions for investors in business trusts (REITs and InvITs) to encourage investment in real estate and infrastructure through operating companies.
Additionally, the official mentioned that the bill eases regulations for data centres to attract foreign cloud companies, thereby helping to establish major “AI data cities” in India and draw substantial investment. The second set of proposals in the bill focuses specifically on strengthening India as a manufacturing hub—particularly for electronics—and bolstering the supporting supply chain. Global companies bring equipment, components, and materials to India to have goods manufactured here; these measures provide them with the long-term certainty required for investment.
Previously, income earned by a foreign company from supplying machinery and tooling to an Indian factory—which manufactured electronics on its behalf—was tax-exempt for a period of five years. The bill extends this exemption by another ten years, significantly broadening the scope of certainty. It also explicitly lists the electronic goods covered under these rules—such as mobile phones, laptops, personal computers, tablets, servers, and their essential parts and accessories—thereby eliminating any potential ambiguity. An official stated that this is expected to foster the growth of a contract manufacturing ecosystem for these products in India.
The bill also includes provisions to facilitate component supplies to electronics factories. Foreign companies that store such components in Indian bonded warehouses for supply to local contract manufacturers were previously granted ‘safe harbour’ treatment, allowing them to pay tax based on a low deemed margin of 2 per cent.
(With IANS inputs)
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