What changes are proposed for offshore investment funds?
The Bill proposes to rationalise conditions for an Eligible Investment Fund (EIF) so that fund management activity carried out through an eligible fund manager in India does not constitute a business connection in India.
CBDT said the number of conditions for an eligible investment fund is proposed to be reduced from 13 to five.
Under the proposed framework, the fund would have to be a non-resident entity, be resident in a country having a Double Taxation Avoidance Agreement (DTAA) with India or in a notified jurisdiction, ensure that aggregate investment by Indian residents does not exceed 5% of the corpus, not carry on or control and manage any business in India, and ensure that no person acting on behalf of the fund undertakes any activity that creates a business connection in India other than permitted activities carried out by the eligible fund manager.
CBDT said the amendment has been proposed following representations from stakeholders seeking rationalisation of conditions to enable fund managers to relocate to India while providing tax certainty.
What changes are proposed for data centre services?
The Bill proposes changes to the exemption available to foreign companies procuring data centre services from specified data centres in India.
The proposed amendments seek to remove the requirement for notification of the foreign company by the Central Government and also remove the requirement for notification of the specified data centre.
The Bill also proposes allowing the lease model of operation for specified data centres.
CBDT said the notification requirements are proposed to be removed as foreign companies providing cloud services and Indian companies providing data centre services would be required to furnish information in the prescribed manner.
What tax proposal has been made for electronics manufacturing?
The Bill proposes extending the exemption period available to foreign companies providing capital goods, equipment or tooling equipment to Indian contract manufacturers.
The exemption, which was available till tax year 2030-31, is proposed to be extended by another 10 years till tax year 2040-41.
The Bill also proposes defining “specified electronic goods” to provide greater clarity.
The proposed definition includes mobile phones, laptops, all-in-one personal computers, tablets, servers, ultra small form factor (USFF) devices, sub-assemblies of these products, and hearables, wearables and related accessories.
Is there a proposal for foreign companies storing electronic components?
Yes.
The Bill proposes a new exemption for foreign companies storing components in warehouses located in customs bonded areas for supply to Indian contract manufacturers producing specified electronic goods.
According to the FAQs, the exemption would apply to income arising from the sale of such components.
The contract manufacturer should produce specified electronic goods on behalf of a foreign company, and the foreign company would be required to furnish information in the prescribed manner.
The proposed exemption would be available for 15 years, till tax year 2040-41.
What is proposed for the rough diamond trade?
The Bill proposes a new exemption for eligible foreign companies engaged in the rough diamond trade.
The exemption would apply to income from the sale of rough diamonds carried out through Special Notified Zones (SNZs) in Mumbai and Surat.
Eligible entities would include foreign companies engaged in diamond mining and companies functioning as sightholders, brokers, aggregators or tender and auction entities.
The proposed exemption would be available for 15 years, up to tax year 2040-41.
What changes are proposed for REITs and InvITs?
The Bill proposes restoring exemption on dividend income received by unit holders of business trusts even when the underlying special purpose vehicle (SPV) opts for the new tax regime.
At present, dividend exemption is available to unit holders only if the SPV is taxed under the old regime.
The proposed amendment seeks to provide exemption even where the SPV moves to the new tax regime.
To compensate for the revenue impact, an additional surcharge of 15% has been proposed on such SPVs.
When will these proposals take effect?
The proposed amendments under the Taxation and Other Laws (Amendment) Bill, 2026 will come into effect only after the Bill is passed by Parliament and receives the President’s assent.
