India's Finance Ministry is preparing to introduce the Taxation and Other Laws (Amendment) Bill, 2026, in Parliament this week. This significant legislation is designed to roll out a series of new incentives aimed at attracting foreign investment and bolstering domestic manufacturing across several key economic sectors.
The proposed Tax Bill will supersede an Ordinance issued on June 5, which exempted foreign institutional investors (FIIs) from withholding tax on investments in government securities. The broader scope of the new Bill reflects a strategic move to address ongoing geopolitical uncertainties and stimulate the nation's investment climate.
Targeted Sectoral Support
Sources indicate that the Bill will introduce specific measures to support critical industries. These include:
- Data Centers: Provisions for tax relaxations specifically for data centers that are leased and operated by Indian companies.
- Electronics Manufacturing: Fresh incentives to strengthen the electronics supply chain. This includes tax exemptions on income derived from storing components in custom bonded warehouses, provided by foreign companies for use by contract manufacturers of specified electronic goods.
- Fund Management: A liberalised regime for fund management, aiming to streamline operations and attract more capital.
- Rough Diamond Trading: Tax exemptions on income from the sale of rough diamonds for foreign companies. This exemption is set to last for a 15-year period, extending until March 31, 2041.
The government's intent is to build upon previous measures taken in June, which sought to mitigate external economic shocks and ensure the stability of the domestic economy, particularly supporting sectors affected by global conflicts, such as the West Asia war.
Expert Outlook on Reforms
"The liberalisation of the fund management regime, incentives for electronics supply chains, facilitation measures for data centres and diamond trading, and tax relief for foreign investors in government securities collectively point towards a policy objective of attracting global capital and business activity into India," stated Richa Sawhney, Partner - Tax, Grant Thornton Bharat.
Sawhney further emphasised that these amendments collectively demonstrate a clear focus on investment facilitation, enhancing supply-chain resilience, and establishing long-term tax certainty within the Indian economy.
By implementing these comprehensive reforms, India aims to solidify its position as an attractive destination for global capital and foster robust domestic industrial growth.