In a move that will help boost foreign capital inflows, the government has proposed a slew of tax concessions under a new Bill.
The Taxation and Other Laws (Amendment) Bill, 2026, expected to be presented in the Parliament this week, offers long-term tax holidays for a clutch of sectors, and extends the waivers for some others. It also eases the conditions for India-domiciled foreign funds to avail tax exemption on their global income.
The existing tax break for foreign companies providing capital goods and machinery to contract manufacturers and warehouses in the electronics sector has been extended by 10 years through March, 2041. The move will come in handy for Big Tech companies including Apple and Google who plan to scale up manufacturing in India over the next few years.
The sectors to benefit from the latest set of tax reliefs and relaxations include data centres and rough diamond trading.
The draft Bill reviewed by FE also restores tax neutrality by stating that that dividend distribution through real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) will remain exempt in the hands of unit holders, even if the special purpose vehicles through which they manage properties opted for concesional tax regime.
However, to stem the revenue loss from this change, the Bill proposes raising the surcharge on SPVs opting for the new tax regime to 25% from 10%. The surcharge for other domestic companies will remain unchanged at 10%.
The Bill also proposes to simplify the tax exemption for foreign companies procuring services from a specified data centre till March 2047. There won’t be any requirement for a separate Central government notification in thie regard, the Bill states. It also allows a lease model for data centres, besides ownership model, for an Indian company partnering with a foreign firm.
The Centre is looking to give additional tax concessions to investors at a time when India has seen significant outflows of foreign capital, and domestic investment momentum is below potential. In June, the government and the Reserve Bank of India announced several measures to attract overseas capital. These included scrapping capital gains and withholding taxes for foreign portfolio investments in government securities, effective Aporil 1, 2026. The Bill proposes to convert the Ordinance issued earlier in this regard into law.
“While these amendments cover diverse areas, from fund management to electronics manufacturing, they appear to be driven by a common objective,” said Vishwas Panjiar, managing partner, SVAS Business Advisors LLP.
“Taken together, these changes point to a broader policy direction where the tax framework is being used not merely to raise revenue or provide incentives, but to strengthen India’s investment ecosystem and enable the country to capitalise on opportunities arising from evolving global supply chains and geopolitical developments,” he added.
The government gas proposed tax exemptions for foreign companies providing capital goods and equipment to contract manufacturers for use in electronic manufacturing in India till March 31, 2041, extending the earlier tax break by 10 years.
The Bill also exempts tax with the same timeline for foreign companies which store components in a warehouse in a custom bonded area and provide them to a contract manufacturer for manufacturing specified electronic goods. It proposes a tax exemption on sale of rough diamonds till March 2041 for foreign diamond mining companies and related entities.
The Bill also proposes a defined list of ‘specified electronic goods’ such as mobile phones, laptops, and tablets, replacing the broad reference to ‘electronic goods’. “By expressly defining the eligible product categories, the Bill is expected to reduce interpretational disputes, while the extended exemption provides long-term tax certainty for global manufacturers,” said Amit Maheshwari, managing partner, AKM Global.
In addition, the Bill also proposes to amend the Payment and Settlement Systems Act, 2007, removing reference of the old and now repealed Income-tax Act. It gives the government the power to restrain all banks or system providers from imposing any charge on a person paying or receiving any amount using a notified electronic mode of payment, said Sumeet Hemkar, partner, Deloitte India.
It also proposes to simplify the tax exemption for foreign companies procuring data centre services from a specified data centre till March 2047. There won’t be a requirement for a separate Central government notification in this regard, the Bill states .
It also allows a lease model of ownership of data centres, and not just the ownership model, to be operated by Indian company partnering with a foreign firm.
“By reducing procedural hurdles and recognising leased facilities, the proposal is expected to improve the ease of doing business, encourage investment in India’s digital infrastructure, and support the continued growth of the country’s data centre ecosystem,” Maheshwari said.
The Bill proposes relaxing the eligibility conditions for an Eligible Investment Fund (EIF) managed by an Indian fund manager to avail tax exemption on its global income.
As per the proposal, offshore funds would no longer need to satisfy a minimum investor threshold of 25 members, a maximum 10% participation interest for a single investor, an aggregate participation cap of 50% for 10 or fewer investors, and a restriction on investing more than 25% of the corpus in a single entity. The government also proposed that offshore funds would no longer have restrictions on investments in associate entities and a minimum monthly average corpus requirement of Rs 100 crore.
“These changes should give the much needed flexibility to fund managers and significantly enhance India’s competitiveness as a fund management destination for both India-focused and global investment strategies,” said Tejas Desai, partner and financial services tax leader, EY India.
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