The Indian government has introduced significant tax amendments aimed at bolstering the domestic electronics manufacturing sector. The Taxation and Other Laws (Amendment) Bill, 2026, recently presented in the Lok Sabha, includes proposals for extending existing tax benefits and introducing new ones, as detailed in Frequently Asked Questions (FAQs) released by the Central Board of Direct Taxes (CBDT).
Extended Exemptions for Capital Goods
A key proposal in the Bill is the extension of the tax exemption currently available to foreign companies that supply capital goods, equipment, or tooling to Indian contract manufacturers. This benefit, which was set to expire in tax year 2030-31, is now proposed to be extended by an additional 10 years, pushing its availability until tax year 2040-41. This aims to provide long-term certainty and encourage foreign investment in the supply chain for electronics manufacturing.
New Relief for Component Storage
In a fresh initiative, the Bill introduces a new tax exemption for foreign companies involved in storing electronic components within customs bonded warehouses in India. This exemption applies to income generated from the sale of these components, provided they are destined for onward supply to Indian contract manufacturers producing specified electronic goods on behalf of the foreign company. This new benefit is also proposed to be available for 15 years, until tax year 2040-41, subject to the foreign company furnishing prescribed information.
Defining 'Specified Electronic Goods'
To provide greater clarity, the amendment also includes a specific definition for “specified electronic goods.” This comprehensive definition covers a range of products vital to the modern economy, including:
- Mobile phones
- Laptops
- All-in-one personal computers
- Tablets
- Servers
- Ultra small form factor (USFF) devices
- Sub-assemblies of the above products
- Hearables, wearables, and related accessories
Broader Impact of the Bill
While the focus is strongly on electronics manufacturing, the Taxation and Other Laws (Amendment) Bill, 2026, also encompasses other significant tax reforms. These include proposed changes for offshore investment funds, data centre services, the rough diamond trade, and business trusts like REITs and InvITs. The CBDT's FAQs clarify that these measures collectively aim to simplify compliance, enhance tax certainty, and attract global investments across various sectors.
It is important to note that these proposals will become effective only after the Bill successfully passes through Parliament and receives the President's assent, formalizing them into law.