CBDT Clarifies 2026 Tax Bill: Relief for Electronics, Funds, Data Centers

The Central Board of Direct Taxes (CBDT) has issued comprehensive FAQs detailing the key proposals within the Taxation and Other Laws (Amendment) Bill, 2026, recently introduced in the Lok Sabha.

This bill outlines significant tax relief and adjustments across several crucial sectors, aiming to clarify regulatory changes and provide greater certainty.

Streamlining Offshore Investment Fund Conditions

The bill intends to simplify qualifying conditions for Eligible Investment Funds (EIFs), reducing the required criteria from 13 to five. This simplification seeks to prevent fund management activities in India from establishing a business connection.

Such measures are designed to encourage global fund managers to relocate their operations to India, offering enhanced tax certainty for their activities.

Easing Exemptions for Data Center Operations

For data center services, the proposed amendments aim to ease tax exemptions for foreign companies. This involves removing the requirement for the Central Government to notify both the foreign company and the data center individually.

Additionally, benefits will extend to data centers operating under a lease model. Both foreign cloud service providers and Indian data center operators will need to provide prescribed information for these exemptions.

Extending Tax Relief for Electronics Production

A significant proposal involves extending the tax exemption for foreign companies supplying capital goods, equipment, or tooling to Indian contract manufacturers. This exemption is proposed for an additional 10 years, shifting from tax year 2030-31 to 2040-41.

The amendment further clarifies the definition of ‘specified electronic goods’. This expanded scope now includes items such as mobile phones, laptops, all-in-one personal computers, tablets, servers, and USFF devices.

It also covers sub-assemblies, hearables, wearables, and related accessories, ensuring a broad application of the relief.

A new exemption is also introduced for foreign companies that store electronic components in customs bonded warehouses. This applies when components are for supply to Indian contract manufacturers of specified electronic goods.

Income derived from the sale of such components would be exempt for 15 years, until tax year 2040-41.

New Exemptions for Rough Diamond Sales

The bill proposes a fresh tax exemption for eligible foreign companies earning income from selling rough diamonds. This applies to sales conducted through Special Notified Zones (SNZs) located in Mumbai and Surat.

This benefit will also be available for a period of 15 years, concluding with tax year 2040-41. It encompasses various entities involved in the trade, including foreign mining companies and sightholders.

Additionally, brokers, aggregators, and entities conducting tenders or auctions are covered by this new exemption.

Adjustments for REITs and InvITs

For Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), the bill seeks to reinstate the tax exemption on dividend income for unit holders. This applies even if the underlying Special Purpose Vehicle (SPV) has adopted the new tax regime.

To maintain balance, an additional 15% surcharge is proposed to be levied on such Special Purpose Vehicles.

These proposed provisions are slated to take effect only after the bill successfully passes through Parliament and receives the necessary presidential assent.