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Informist, Monday, Aug. 10, 2026

 

--Rajya Sabha passes Taxation and Other Laws (Amendment) bill 

 

MUMBAI – Parliament on Monday passed the Taxation and Other Laws (Amendment) Bill, 2026, with the Rajya Sabha returning the bill on Monday. The bill, tabled by Finance Minister Nirmala Sitharaman, proposes several tax and regulatory measures to promote investment, manufacturing and ease of doing business.

 

The bill proposes amendments to the Payment and Settlement Systems Act, 2007, including a new framework for regulating charges on electronic payments. It also seeks to replace the ordinance issued in June that provided capital gains and withholding tax exemptions to foreign portfolio investors investing in government securities.

 

Under the proposed changes, the government will be empowered to notify electronic payment modes on which banks and payment system providers cannot impose charges. This would replace the existing provisions under the Income-tax Act and give the government greater flexibility to determine which digital payment methods may be subject to a merchant discount rate. Merchant discount rate is the fee charged to merchants by banks for processing digital transactions, including payments made through credit cards, debit cards and unified payment interfaces.

 

The bill also significantly eases conditions for investment funds managed from India to qualify for tax exemption on their global income, potentially strengthening India's position as an international fund management centre.

 

The proposed framework removes several eligibility requirements for offshore funds, including the minimum threshold of 25 investors, the cap of 10% on participation by a single investor and the aggregate 50% participation limit for 10 or fewer investors. It also removes the restriction preventing funds from investing more than 25% of their corpus in a single entity. The bill further proposes to eliminate restrictions on investments in associate entities and the requirement to maintain a minimum monthly average corpus of INR 1 billion.

 

The bill also removes the specific provision allowing the government to prescribe separate exemption conditions for funds operating from International Financial Services Centres. The bill proposes to extend tax incentives for foreign companies supplying capital goods to electronics manufacturers through 2040-41 (Apr-Mar). It also extends tax exemptions until FY41 for foreign companies storing components in customs-bonded warehouses for contract manufacturing in India. A separate exemption until FY41 has been proposed for foreign diamond mining companies and related entities selling rough diamonds through notified special zones. 

 

The bill seeks to replace the Jun. 5 ordinance that exempted foreign portfolio investors from tax on interest income and capital gains arising from investments in government securities. The government had introduced the exemptions to encourage foreign inflows to support foreign exchange reserves. Under the ordinance, interest earned on government securities and capital gains arising from their sale, exchange or transfer were exempt from tax.  End

 

Reported by Kabir Sharma

Edited by Saji George Titus

 

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