How Tax Bill is likely to bring support for more sectors

The finance ministry is likely to table the Taxation and Other Laws (Amendment) Bill, 2026 in Parliament this week, which is expected to provide more incentives to attract foreign investors and boost domestic manufacturing in sectors including data centres and electronics.

The Tax Bill is set to replace the June 5 Ordinance exempt foreign institutional investors (FIIs) from withholding tax on investments in government securities.

According to sources, the Bill is also likely to include provisions to liberalise fund management as well as fresh incentives for electronics and measures to help data centres and rough diamond trading.

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Sources explained that with the ongoing geopolitical uncertainty, it was felt that there is a need to further boost the country’s investment climate and domestic production capabilities.

“The measures taken in June to boost foreign investment and capital were to help offset the impact of the external economic shocks and ensure stability of the domestic economy and support key sectors impacted by the West Asia war,” noted a source close to the development, adding that following representations and discussions with stakeholders, it was felt that more measures would be required.  “These have accordingly been included in the Bill, which will be introduced in Parliament in the coming days,” the source explained.

Key provisions in the Bill could include tax relaxations for data centres leased and operated by Indian companies, tax exemption on income of sale of rough diamonds in the hands of a foreign company for a 15-year period up to March 31, 2041 as well as a similar tax exemptions in come from storage of components in a warehouse in a custom bonded area, in the hands of a foreign company which stores components in a warehouse in a custom bonded area for providing them to a contract manufacturer to be used for manufacturing of specified electronic goods.

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Richa Sawhney, Partner - Tax, Grant Thornton Bharat, noted that while the Ordinance addressed immediate concerns arising from global economic developments, the government now looks to supplement those measures with additional reforms following stakeholder consultations.

“The liberalisation of the fund management regime, incentives for electronics supply chains, facilitation measures for data centres and diamond trading, and tax relief for foreign investors in government securities collectively point towards a policy objective of attracting global capital and business activity into India,” she said, adding that collectively, the amendments reflect a clear emphasis on investment facilitation, supply-chain resilience and long-term tax certainty.