Taxation And Other Laws Amendment Bill 2026 Proposes Relief for Offshore Funds and Key Sector Tax Changes

The Taxation and Other Laws (Amendment) Bill, 2026 proposes a series of tax-related changes aimed at simplifying investment structures and supporting selected sectors. The Bill seeks to replace the Taxation Laws (Amendment) Ordinance issued in June 2026 while incorporating additional measures based on stakeholder feedback.

A major focus is on easing eligibility conditions for offshore investment funds managed from India. The proposed legislation also includes tax provisions relating to government securities, electronics manufacturing, data centres, rough diamonds, REITs and InvITs.

Offshore Fund Tax Relief in India Under Taxation Bill 2026

The Taxation Bill, 2026 proposes to simplify the rules for Eligible Investment Funds (EIFs) managed from India but investing overseas.

• Minimum investor threshold requirements.
• Limits on a single investor's participation interest.
• Restrictions on investment concentration in one entity.
• Restrictions on investments in associate entities.
• The requirement to maintain a minimum monthly average corpus of ₹100 crore.
• Separate exemption conditions for funds operating from the International Financial Services Centre (IFSC).
• EIFs must remain non-resident entities.
• Funds must comply with other prescribed conditions under the law.

Government Securities Tax Exemption for Foreign Investors

The Taxation Bill, 2026 retains the tax relief introduced through the June 2026 Ordinance for eligible foreign investors.

• Eligible Foreign Institutional Investors (FIIs) and the Bank for International Settlements (BIS) will continue to receive tax relief.
• Interest income earned from investments in Indian government securities will remain tax-exempt.
• Capital gains arising from these investments will also continue to be exempt from tax.
• The exemption will remain subject to prescribed reporting and compliance requirements.

Electronics And Data Centre Tax Exemption Proposals

The Taxation Bill, 2026 proposes tax measures to support electronics manufacturing and data centre services in India.

• Foreign companies storing and selling electronic components through customs bonded areas may qualify for tax exemption.
• The exemption applies where components are supplied to Indian contract manufacturers producing specified electronic goods.
• The proposed tax exemption will remain available until March 31, 2041.
• The Bill replaces the term "electronic goods" with "specified electronic goods" for greater clarity.
• Foreign companies procuring services from Indian data centres may qualify for tax exemption.
• The proposal removes separate notification requirements for claiming the exemption.
• Leased data centre facilities will also be eligible under the proposed framework.

Rough Diamond Trade and REIT Tax Changes Explained

The Taxation Bill, 2026 proposes a tax exemption for eligible foreign entities involved in the rough diamond trade through notified special zones in India.

• Tax exemption on income from the sale of rough diamonds.
• Exemption proposed to remain available until March 31, 2041.
• Available subject to prescribed conditions.
• Eligible entities include:
  • Diamond mining companies
  • Sightholders
  • Brokers
  • Aggregators
  • Auction and tender operators

Read More: Indian Railways Reports 8% Growth in Revenue in July 2026 Due to Higher Freight Loading.

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Conclusion

The Taxation and Other Laws (Amendment) Bill, 2026 proposes a broad set of tax reforms covering offshore investment funds, government securities and multiple industry segments. The proposed changes aim to simplify compliance requirements and modify eligibility conditions across various tax exemption frameworks.

Several sector-focused incentives, including those for electronics manufacturing, data centres and rough diamond trading, are proposed to remain available until March 31, 2041. The provisions outlined in the Bill will become effective only after receiving approval from Parliament.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.