New Delhi, India – The Indian government has unveiled the Taxation and Other Laws (Amendment) Bill, 2026, a comprehensive legislative package designed to significantly enhance the nation's appeal to foreign investors, bolster its manufacturing capabilities, and streamline the overall ease of doing business.
This landmark bill focuses on three core objectives: drawing in substantial foreign capital, vigorously promoting the 'Make in India' initiative, and simplifying the tax compliance landscape. These measures are intended to provide greater clarity and predictability for international investors and businesses operating within India.
Attracting Global Investment
A key aspect of the proposed legislation includes substantial relaxations for foreign investment funds operating from India. The bill aims to ensure that global investment funds are not automatically deemed to be conducting business in India solely because their fund managers are based in the country. This strategic move is expected to encourage more global fund managers to relocate to India, thereby creating high-value employment opportunities, while robust safeguards against misuse and 'round-tripping' will remain in place.
Furthermore, the bill offers significant tax relief for investors in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). Dividend income distributed through these business trusts will maintain its tax-exempt status for investors, even if the underlying operating company transitions to the new corporate tax regime. To ensure revenue neutrality, an additional levy will instead be applied at the operating company level.
Boosting Digital and Manufacturing Sectors
In a bid to fortify India's burgeoning digital infrastructure, the government plans to simplify tax regulations for foreign cloud companies utilizing Indian data centers. The bill removes several existing approval requirements and explicitly permits leased data center models. This is anticipated to accelerate the development of large-scale AI data centers and attract crucial global cloud investments into the country.
On the manufacturing front, the legislation extends a vital tax exemption for foreign companies supplying machinery and tooling to Indian contract manufacturers of electronics by an additional 10 years. This incentive will now be available for a total period of 15 years, until fiscal year 2040-41, covering a wide range of products including mobile phones, laptops, personal computers, tablets, and servers.
The bill also proposes a 15-year tax exemption for foreign diamond miners and related entities that sell rough diamonds through designated trading zones in Mumbai and Surat. This initiative is strategically aimed at positioning India as a preeminent global hub for the rough diamond trade.
Additionally, foreign companies that store electronic components in bonded warehouses for supply to Indian manufacturers will benefit from a full 15-year tax exemption on their income, replacing the previous presumptive taxation framework. This change is expected to foster just-in-time supply chains, further strengthening India's electronics manufacturing ecosystem, and reducing compliance burdens for international suppliers.
The government believes these comprehensive reforms will collectively foster a more vibrant investment climate, generate high-quality jobs, and build a more robust, globally integrated economic ecosystem for India.