India’s New Tax Bill: Boost for Investment & Electronics Manufacturing

The Indian Central government has introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha. This legislation aims to significantly reform the tax landscape, fostering investment, supporting manufacturing, and providing enhanced tax certainty for both domestic and global investors.

The bill is set to replace the Income-tax (Amendment) Ordinance, 2026, streamlining the existing framework under the Income-tax Act, 2025. It seeks to reduce compliance burdens while maintaining essential financial safeguards.

Extending Incentives for Electronics Manufacturing

A primary focus of the bill involves extending crucial tax incentives for the electronics manufacturing sector. This move aims to bolster the domestic production ecosystem and attract foreign investment.

• It extends tax exemption for foreign companies supplying capital goods, equipment, or tooling to Indian contract manufacturers of specified electronic goods.
• The sunset date for these incentives shifts significantly from 2030-31 to March 31, 2041.
• The scope of eligible electronic goods also broadens to include items like laptops, tablets, servers, hearables, wearables, and their accessories.

Relief for Business Trusts and Digital Payment Reforms

The legislation also addresses specific concerns within the financial sector, offering relief to business trusts. It removes a previous restriction that denied tax exemption on dividends received by unit holders.

This exemption is now applicable even when the special purpose vehicle (SPV) had opted for the new tax regime.

Beyond direct taxation, the bill introduces amendments to the Payment and Settlement Systems Act, 2007. These changes streamline regulations for electronic payment modes.

• It removes references to the Income-tax Act from provisions related to electronic payment methods.
• It empowers the Central government to specify electronic payment methods on which banks or payment system providers cannot levy charges.

The government confirmed that this new legislation will formally replace the Income-tax (Amendment) Ordinance, 2026, through an Act of Parliament. It will validate all actions taken under the ordinance and integrate additional taxation measures identified through stakeholder consultations following the Finance Act, 2026.