New Delhi: The government is preparing to introduce the Taxation and Other Laws (Amendment) Bill, 2026, during the ongoing session of Parliament. The proposed law aims to attract foreign investment and support domestic manufacturing.
Wider Tax Relief
According to a Bloomberg report, the Bill may offer tax benefits to foreign investors putting money into Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), data centres and government bonds.
It may also simplify rules for overseas investment funds operating in India. The government hopes these steps will make the country a more attractive destination for global capital and strengthen economic growth.
Foreign suppliers providing products or components to Indian electronics manufacturers could also receive extended tax exemptions. Similar benefits may be considered for data centres and companies involved in diamond mining.
Manufacturing Push
One of the major proposals is to extend the tax benefit available for contract manufacturing from its current expiry in 2031 to 2041.
The extension could cover electronic products such as mobile phones, laptops, tablets and servers. This may encourage global companies to expand their supply chains and production operations in India.
Investors May Benefit
The government is reportedly considering converting an existing ordinance into a permanent law. It provides foreign institutional investors with tax exemptions on interest earned from certain government securities.
The exemption may also cover capital gains arising from the sale or transfer of these securities.
These measures are aimed at slowing foreign fund outflows, supporting the rupee and protecting the economy from external shocks, including uncertainty following the US-Iran conflict.
If approved, the proposals could improve foreign investor confidence and support the Indian stock market. However, any market impact will depend on global conditions and investor sentiment.
Time Running Out
Finance Minister Nirmala Sitharaman may introduce the Bill before the parliamentary session ends on August 13.
However, proceedings have faced disruption over opposition demands for discussions on examination paper leaks and student protests. With limited time remaining, the government may face challenges in securing Parliament’s approval for the proposed tax measures during this session.
