Tax Amendment Bill 2026 FAQs: CBDT explains proposed tax relief for electronics manufacturing

The Taxation and Other Laws (Amendment) Bill, 2026 has been introduced in the Lok Sabha, following which the Central Board of Direct Taxes (CBDT) released a detailed set of frequently asked questions (FAQs) explaining the key proposals contained in the legislation.

The FAQs outline proposed amendments covering offshore investment funds, electronics manufacturing, data centres, rough diamond trading and business trusts such as REITs and InvITs.

What changes are proposed for offshore investment funds?

The Bill proposes to simplify the conditions governing an Eligible Investment Fund (EIF) so that fund management activities undertaken through an eligible fund manager in India do not create a business connection in the country.

According to the CBDT, the number of qualifying conditions is proposed to be reduced from 13 to five.

Under the revised framework, an eligible fund must be a non-resident entity, be resident in a country with which India has a Double Taxation Avoidance Agreement (DTAA) or in a notified jurisdiction, ensure that investment by Indian residents does not exceed 5% of its corpus, refrain from carrying on or controlling any business in India, and ensure that no person acting on its behalf undertakes activities that create a business connection in India other than those permitted for an eligible fund manager.

CBDT said the changes are aimed at addressing industry representations seeking a simpler regime that encourages global fund managers to relocate operations to India while providing greater tax certainty.

What changes are proposed for data centre services?

The Bill proposes to ease the tax exemption available to foreign companies procuring data centre services from specified facilities in India.

It seeks to remove the existing requirement for the Central Government to notify both the foreign company and the specified data centre. It also proposes to extend the benefit to data centres operating under a lease model.

According to the CBDT, these notification requirements are proposed to be dispensed with because both foreign cloud service providers and Indian data centre operators will instead be required to furnish prescribed information.

What tax proposal has been made for electronics manufacturing?

The Bill proposes extending the tax exemption available to foreign companies that provide capital goods, equipment or tooling equipment to Indian contract manufacturers.

The benefit, currently available until tax year 2030-31, is proposed to be extended by another 10 years, up to tax year 2040-41.

CBDT said the amendment also seeks to provide greater clarity by defining the term "specified electronic goods."

The proposed definition covers mobile phones, laptops, all-in-one personal computers, tablets, servers, ultra small form factor (USFF) devices, sub-assemblies of these products, as well as hearables, wearables and related accessories.

Is there a proposal for foreign companies storing electronic components?

Yes.

The Bill proposes a fresh exemption for foreign companies that store electronic components in warehouses located in customs bonded areas for onward supply to Indian contract manufacturers producing specified electronic goods.

According to the FAQs, the exemption will apply to income arising from the sale of such components.

The Indian contract manufacturer must manufacture specified electronic goods on behalf of the foreign company, while the foreign company will be required to furnish information in the prescribed manner.

The proposed exemption would remain available for 15 years, up to tax year 2040-41.

What is proposed for the rough diamond trade?

The Bill proposes a new tax exemption for eligible foreign companies engaged in the rough diamond trade.

The benefit would apply to income earned from the sale of rough diamonds through Special Notified Zones (SNZs) located in Mumbai and Surat.

Eligible entities include foreign mining companies as well as sightholders, brokers, aggregators, and entities conducting tenders or auctions.

The proposed exemption will be available for 15 years, ending with tax year 2040-41.

What changes are proposed for REITs and InvITs?

The Bill proposes to restore the tax exemption on dividend income received by unit holders of business trusts even when the underlying special purpose vehicle (SPV) has opted for the new tax regime.

Currently, this exemption is available only if the SPV continues under the old tax regime.

To offset the revenue impact of the proposed change, the Bill also proposes an additional 15% surcharge on such SPVs.

When will these proposals take effect?

The provisions contained in the Taxation and Other Laws (Amendment) Bill, 2026 will become effective only after the legislation is passed by Parliament and receives the President's assent.