Taxation and Other Laws Amendment Bill, 2026 introduced to boost foreign investment and manufacturing

Hindustan Times - India · 6 Aug 2026 · 2 min read
Prelims · Economy Mains · GS3 Economy High relevance

Finance Minister Nirmala Sitharaman introduced the Taxation and Other Laws Amendment Bill, 2026 to attract global capital and strengthen domestic manufacturing through tax incentives, replacing an earlier ordinance that provided tax exemptions to foreign investors in government securities.

Key points

Taxation and Other Laws Amendment Bill, 2026 seeks to amend the Payment and Settlement Systems Act, 2007, Income-tax Act, 2025, and Finance Act, 2026, replacing the Income-tax (Amendment) Ordinance, 2026.

The bill aims to mitigate the impact of global economic uncertainty by providing stable and predictable tax treatment to attract foreign institutional investors (FIIs), foreign portfolio investors (FPIs), and the Bank for International Settlements (BIS).

Key measures include tax exemptions for foreign investors in government securities (G-Secs), extended tax benefits for electronics manufacturing from 5 to 15 years, and a 15-year tax exemption for rough diamond trade in special zones in Mumbai and Surat.

[GS3-Economy] The bill aligns with India's strategy to deepen sovereign debt markets and enhance liquidity in G-Secs, crucial for macroeconomic stability and attracting long-term foreign capital.

The bill proposes to allow Indian data centres to operate on a leased basis, aiming to build 'AI data cities' and attract significant global investment in digital infrastructure.

For Make in India, the bill extends tax benefits for foreign companies supplying machinery to Indian electronics manufacturers, benefiting firms like Apple and boosting domestic production.

The rough diamond trade exemption aims to shift a significant share of global trade to India and develop a financing ecosystem around it, enhancing India's position in the global diamond market.

Way Forward: India should establish a robust monitoring mechanism for tax incentives to ensure they achieve intended outcomes, strengthen dispute resolution mechanisms for foreign investors, and align tax policies with long-term industrial and digital infrastructure goals.

Key terms

Foreign Institutional Investors (FIIs)

Entities registered outside India that invest in the country's financial markets. FIIs play a crucial role in bringing foreign capital, enhancing market liquidity, and deepening financial markets, which is vital for India's economic growth and stability.

Bank for International Settlements (BIS)

An international financial institution that serves as a bank for central banks. The BIS promotes monetary and financial stability globally, and its inclusion in the bill highlights India's efforts to align with global financial standards and attract institutional investment.

Make in India

A government initiative launched in 2014 to encourage multinational and domestic companies to manufacture in India. The program aims to boost domestic manufacturing, create jobs, and reduce dependency on imports, aligning with the bill's focus on electronics and infrastructure.

Income-tax (Amendment) Ordinance, 2026

A temporary legislative measure promulgated by the President of India to provide immediate tax exemptions for foreign investors in government securities. Ordinances are valid for six weeks unless approved by Parliament, underscoring the urgency of the government's economic measures.