Finance Minister Nirmala Sitharaman on Tuesday introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha, laying out a sweeping package of tax reliefs designed to attract foreign investment, deepen India's manufacturing base, and reduce the compliance burden on businesses operating in or through the country. The Bill targets global fund managers, cloud companies, electronics contract manufacturers, and rough diamond traders — sectors where policy uncertainty has historically deterred commitment.

Easing the Path for Global Fund Managers

One of the Bill's central provisions sharply trims the eligibility conditions that foreign fund managers must satisfy to relocate to India. The revised framework retains only those conditions essential to prevent misuse and round-tripping of money by Indian residents, according to a senior official. Crucially, the Bill allows fund managers to set up in India without triggering a determination that the foreign fund itself is 'doing business in India' — a classification that previously created an unintended tax exposure.

The Bill also restores the tax exemption for investors in business trusts — specifically Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) — to reinvigorate capital flows into real estate and infrastructure through operating companies. Alongside, rules for data centres have been eased to attract foreign cloud companies and support India's ambition to build large 'AI data cities', the official said.

Electronics Manufacturing: Longer Certainty, Cleaner Rules

A second cluster of provisions targets electronics manufacturing and supply-chain deepening. When a foreign company supplies machinery or tooling to an Indian factory producing electronics on its behalf, the income from that arrangement was previously exempt from tax for five years. The Bill extends this exemption by a further ten years, providing a significantly longer planning horizon for global companies considering India as a production base.

The legislation also explicitly defines the electronic goods covered — including mobile phones, laptops, personal computers, tablets, servers, and their key components and accessories — removing ambiguity that had previously complicated compliance. This is expected to expand India's contract manufacturing ecosystem for these products, the official noted.

On component supply, the Bill goes further than an earlier safe-harbour regime that taxed foreign companies storing components in Indian bonded warehouses at a presumptive margin of 2 per cent. The new provision fully exempts this income from tax in India for 15 years, making the arrangement more competitive than comparable offerings from rival manufacturing destinations.

Rough Diamond Trade: Turning Display Zones into Trading Hubs

The Bill takes aim at drawing the global rough diamond trade to India. Foreign diamond miners have until now been permitted only to display rough diamonds in special zones in Mumbai and Surat without incurring tax merely for the display. The new provision goes a step further, fully exempting the income of foreign diamond miners and associated traders from the sale of rough diamonds in these zones for a period of fifteen years. The move is intended to convert these display zones into active trading hubs.

The Overarching Policy Intent

'Overseas players are often unsure whether operating in or through India will create an unexpected tax exposure. These proposals give clear, stable, and predictable tax treatment as well as the process to get the desired tax treatment,' the senior official said. Running through the entire Bill, the official added, is 'a consistent effort to make dealing with the tax system simpler and less burdensome.'

This comes amid sustained government efforts to position India as a preferred destination for global manufacturing and investment, particularly as supply chains reconfigure away from other Asian hubs. The Bill's combined suite of exemptions — spanning funds, cloud infrastructure, electronics, and diamonds — signals a deliberate attempt to address sector-specific friction points that broader policy frameworks had left unresolved. How swiftly the provisions translate into on-ground investment commitments will be closely watched.