The Centre has brought in a new tax reform proposal, and this is more than just a routine amendment. The Taxation and Other Laws (Amendment) Bill, 2026, introduced on Tuesday in the Lok Sabha, is a part of a bigger scheme that looks at attracting investment, increasing manufacturing in the country, enhancing tax certainty and making payment laws consistent with the growing digital economy of India. According to the government, the Bill is introduced when the global economy is faced with changing challenges and the legislative provisions are aimed to sustain stability in the economy and also provide stimulus for the growth of the digital economy.
The Bill would repeal and replace the Income Tax (Amendment) Ordinance, 2026. It is also aimed at amending the Income Tax Act, 2025; the Finance Act, 2026; and the Payment and Settlement Systems Act, 2007.
What is the Tax and Other Laws (Amendment) Bill 2026?
At its core, the bill introduces a bundle of tax and regulatory changes aimed at strengthening India’s proposition to manufacturers and investors, simultaneously alleviating the burden of compliance for businesses. Addressing the context: At a time when geopolitical tussles and interruptions across global supply chains are conjuring new economic headwinds, the proposed changes aim to brace the economy from external shocks and enhance our position from an ease-of-doing-business and greater investor certainty perspective, both domestically as well as internationally.
Rather than introducing a single tax reform, the bill combines several measures covering investment funds, electronics manufacturing, foreign investors, the diamond trade, business trusts and digital payments.
Simpler Rules For Offshore Investment Funds
The main proposal is for offshore investment funds and eligible fund managers.
The Bill seeks to simplify the conditions under the Income Tax Act, 2025, by reducing compliance requirements while retaining key safeguards. The objective is to make India a more competitive destination for global fund management activities and provide greater certainty to overseas investors looking at the country.
Electronics Manufacturing Gets Longer Tax Window
The government has also proposed extending tax incentives for the electronics manufacturing sector.
Under the proposal, foreign companies supplying capital goods, equipment and tooling to Indian contract manufacturers of specified electronic products will continue to enjoy tax exemptions until March 31, 2041, instead of the earlier deadline of 2030-31.
The scope of eligible products has also been widened. The definition would now also include laptops, tablets, servers, hearables, wearables and related accessories along with existing categories, reflecting India’s growing ambitions to become a global electronics manufacturing hub.
Tax Relief For Foreign Investors
Another notable proposal relates to foreign investment in government securities.
The bill proposes to exempt from capital gains tax the sale, exchange or transfer of government securities, including interest income, by Foreign Institutional Investors (FIIs) and the Bank for International Settlements, subject to prescribed reporting requirements.
The move is expected to make Indian government bonds more attractive for overseas investors.
Push For India’s diamond trade
The bill also includes a provision to improve India’s position in the global diamond market.
It seeks to provide a tax exemption until March 31, 2041, for eligible foreign diamond mining companies, sight holders, brokers, aggregators and auction entities on income earned from the sale of rough diamonds through notified special zones.
Business Trust Investors Get Relief
The bill proposes removing an existing restriction affecting business trusts.
Opting for the new tax regime by the special purpose vehicle (SPV) could result in the loss of tax exemption on dividends for unit holders. The proposed amendment removes this restriction, providing relief to investors in these types of trust structures.
Changes To Rules For Digital Payments
Apart from tax provisions, the bill also proposes amendments to the Payment and Settlement Systems Act, 2007.
It removes references to the Income Tax Act from provisions relating to electronic modes of payment and empowers the central government to notify the modes of payment on which banks or payment system providers shall not charge any fees. The proposal provides the legal framework for the government to notify the electronic modes of payment that will be exempt from such charges.
Repealing the Existing Ordinance
The proposed law will formally replace the Income Tax (Amendment) Ordinance, 2026, while validating all actions already taken under it.
The government said that the Bill also includes other tax proposals that came from stakeholder consultation after the Finance Act, 2026, to help repeal the Ordinance through a full Act of Parliament. The Bill was introduced in the Lok Sabha along with the Appropriation (No. 3) Bill, 2026. The House would consider the Bankers’ Books Evidence Bill, 2026, to alter the laws associated with record-keeping for banking. Meanwhile, the Rajya Sabha would present the Registration of Births and Deaths (Amendment) Bill, 2026.
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Priyanka Roshan is a business writer and assistant editor at the NewsX website who tracks everything from stock market swings and corporate earnings to personal finance trends and policy shifts. Known for turning fast-moving business developments into sharp, reader-friendly stories, she combines speed, accuracy, and a data-driven approach to break down complex financial news for everyday audiences.
With over 9.5 years of newsroom experience, Priyanka has worked with leading media organisations, including Bussiness, Times Now, and Ping Digital, covering diverse beats such as business, politics, technology, auto, travel, sports, and the world. From live breaking news desks to SEO-led digital storytelling, she specialises in creating engaging content that keeps readers informed without overwhelming them.
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