The Bill seeks to replace the Taxation Laws (Amendment) Ordinance issued in June and incorporate additional measures proposed after stakeholder representations.
Offshore funds: Bill proposes easing eligibility conditions
A key proposal in the Bill relates to Eligible Investment Funds (EIFs). The government has proposed easing several conditions that offshore funds managed from India need to meet to avail tax exemption on their global income.
The proposed amendments seek to remove conditions relating to:
- Minimum investor thresholds
- Limits on participation interest of a single investor
- Restrictions on investing more than a specified portion of the corpus in one entity
- Restrictions on investments in associate entities
- Minimum monthly average corpus requirement of ₹100 crore
The Bill also proposes removing separate exemption conditions applicable to funds operating from the International Financial Services Centre (IFSC), with the aim of creating a uniform eligibility framework for offshore funds managed from India.
Amit Maheshwari, Managing Partner at AKM Global, a tax advisory firm, said, “The proposed rationalisation reflects a pragmatic shift towards a less prescriptive framework while preserving the safeguards necessary to prevent the creation of a taxable business connection in India.”
Under the proposed framework, the fund would continue to be required to be a non-resident entity, be based in a treaty country or notified jurisdiction, limit Indian investor participation and not carry out business in India beyond permitted fund management activities.
Government securities: June tax relief proposal retained
The Bill proposes to retain the exemption introduced through the June Ordinance for eligible Foreign Institutional Investors (FIIs) and the Bank for International Settlements (BIS).
The proposed exemption covers interest income and capital gains arising from investments in Indian government securities, subject to prescribed reporting requirements.
Electronics: Bill proposes tax exemption till 2041
The proposed legislation seeks to provide tax exemption for foreign companies involved in India’s electronics supply chain.
Under the proposal, foreign companies storing and selling electronic components through customs bonded areas would be eligible for exemption if these components are supplied to Indian contract manufacturers engaged in producing specified electronic goods.
The exemption is proposed to be available till March 31, 2041.
The Bill also proposes replacing the broader reference to “electronic goods” with a defined list of “specified electronic goods” to provide greater clarity.
Data centres: Proposal seeks to expand eligibility
The Bill proposes changes to tax exemption provisions for foreign companies procuring data centre services from specified data centres in India.
It seeks to remove the requirement for separate notification of a foreign company and specified data centre. The proposal also aims to allow data centres operated through lease arrangements to qualify for the exemption.
Rough diamonds: New tax exemption proposed
The Bill proposes introducing a tax exemption for eligible foreign entities engaged in the rough diamond trade.
The proposed exemption would cover income from the sale of rough diamonds undertaken through notified special zones in India and would be available till March 31, 2041.
The proposal covers entities including diamond mining companies, sightholders, brokers, aggregators and tender and auction entities, subject to prescribed conditions.
REITs and InvITs: Bill proposes changes in tax treatment
The proposed amendments also seek to modify taxation rules for business trusts such as Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).
The Bill proposes restoring tax exemption for dividend income received by unit holders, irrespective of whether the underlying special purpose vehicle (SPV) opts for a concessional tax regime.
At the same time, it proposes increasing the surcharge applicable to SPVs under business trust structures opting for specified concessional tax regimes from 10% to 25%.
Experts highlight shift towards simpler framework
Tax experts said the proposed changes could simplify compliance requirements and provide greater tax certainty if approved.
Sumeet Hemkar, Partner at Deloitte India, a professional services firm providing audit, tax, consulting, and financial advisory services, said the Bill “seeks to replace and expand the scope of alterations the Government intends to make in view of the stated evolving global geo-political situation”.
Richa Sawhney, Partner-Tax at Grant Thornton Bharat, a professional services firm in India providing assurance, tax, and consulting services, said, “The amendments reflect a clear emphasis on investment facilitation, supply-chain resilience and long-term tax certainty.”
The proposals will take effect only after approval by Parliament.
-With agencies inputs
