Tax Bill proposes reforms to attract global capital, boost Make in India

Published 4 August 2026 · local

New Delhi: The government on Tuesday introduced the Taxation and Other Laws (Amendment) Bill, 2026, in the Lok Sabha, proposing tax and regulatory reforms aimed

New Delhi: The government on Tuesday introduced the Taxation and Other Laws (Amendment) Bill, 2026, in the Lok Sabha, proposing tax and regulatory reforms aimed at attracting foreign capital, strengthening India's manufacturing ecosystem and improving ease of doing business. The Bill seeks to amend the Payment and Settlement Systems Act, 2007, the Income Tax Act, 2025, and the Finance Act, 2026. The Bill proposes to simplify the rules governing offshore investment funds managed from India by retaining only essential safeguards against misuse and round-tripping. The move aims to encourage global fund managers to relocate to India without risking their overseas funds being treated as having a taxable presence in the country. Quick answers to key questions • 5 QUESTIONS 1 What reforms does the Taxation and Other Laws (Amendment) Bill, 2026 propose for foreign capital in India? ⌵ The Bill aims to attract foreign capital by simplifying rules for offshore investment funds, restoring tax exemptions on dividends for investors in REITs and InvITs, and easing compliance for foreign cloud companies and data centers. 2 How will the proposed tax exemptions under the Bill impact India's manufacturing ecosystem? ⌵ The Bill extends tax exemptions for foreign companies supplying machinery to electronics manufacturers and establishes a 15-year tax exemption for storage of electronic components, thereby promoting long-term investments in the manufacturing sector.

3 Why is the government proposing to revise regulations for Special Purpose Vehicles (SPVs) in the Bill? ⌵ The revisions aim to unify tax treatment for SPVs under business trusts, exempting dividends from tax to investors while increasing the surcharge on SPVs, thus addressing investors' demands and aiming for a revenue-neutral outcome. 4 How does the Bill seek to encourage investment in the diamond industry? ⌵ The Bill proposes a 15-year tax exemption for foreign entities involved in the diamond trade in specified zones, making India a more attractive hub for rough diamond trading. 5 What measures does the Bill include to enhance the appeal of fund management in India? ⌵ The Bill simplifies eligibility conditions for investment funds, retaining only five of the original thirteen requirements, thus improving flexibility for fund managers and attracting both domestic and global investment strategies. The proposal would apply across India, including the International Financial Services Centre (IFSC), providing greater flexibility in the choice of operating locations. The Bill proposes to restore the tax exemption on dividends received by investors in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), even where the underlying special purpose vehicle has shifted to the new tax regime. To keep the change revenue-neutral, an additional surcharge would be levied on such special-purpose vehicles rather than taxing investors.