Tax Relief For Offshore Funds, Diamond Trade To Incentive For Electronics | Key Proposals In New Taxation Bill

The Central government on Tuesday introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha, proposing a series of changes in taxation, aiming to boost investment, provide tax certainty, support manufacturing and replace the Income-tax (Amendment) Ordinance, 2026. The Bill seeks to amend the Income-tax Act, 2025, the Finance Act, 2026 and the Payment and Settlement Systems Act, 2007.

What Does the New Taxation Amendment Bill Introduce? 

The Bill addresses ongoing geopolitical shifts and disruptions in global trade and supply chains. Government officials state these amendments aim to buffer against external economic shocks, support domestic stability, assist affected industries, and simplify business processes while ensuring tax certainty.

Key Proposals 

1- A primary focus of the Bill is rationalising conditions for eligible offshore investment funds and fund managers. It seeks to streamline the Income-tax Act, 2025 by cutting compliance requirements while maintaining necessary safeguards, aimed at encouraging fund management in India and offering clearer tax guidelines for global investors.

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2- The Bill also looks to broaden tax incentives for electronics manufacturing. It proposes extending the tax exemption for foreign companies providing capital goods, equipment, or tooling to Indian contract manufacturers of specified electronic goods, shifting the deadline from 2030-31 to March 31, 2041.

3- Additionally, the scope of specified electronic goods is expanded to include items like laptops, tablets, servers, hearables, wearables, and their accessories.

4- Another major proposal involves new tax exemptions for foreign investors in government securities. The Bill intends to exempt interest income and capital gains from the sale, transfer, or exchange of these securities for Foreign Institutional Investors (FIIs) and the Bank for International Settlements, contingent on adherence to reporting rules.

Tax Exemption For Diamond Trade

To bolster India's role in the global diamond market, the Bill proposes a tax exemption through March 31, 2041, for income generated by eligible foreign diamond mining companies, brokers, sight holders, auction entities, and aggregators from rough diamond sales in designated special zones.

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For business trusts, the proposal removes a restriction that previously blocked tax exemptions on dividends for unit holders if the special purpose vehicle (SPV) had adopted the new tax regime.

Payment And Settlement System 

Beyond tax revisions, the Bill suggests amending the Payment and Settlement Systems Act, 2007, by striking references to the Income-tax Act within sections concerning electronic payment methods. It grants the Central Government the authority to designate electronic payment modes for which banks or system providers are prohibited from charging fees.

The Bill also moves to repeal the Income-tax (Amendment) Ordinance, 2026, while affirming the validity of actions taken under it.

(With Inputs From ANI)