Sitharaman tables Tax amendment Bill to ease rules for funds, data centres

Finance ministry says Bill aims to provide stable and predictable tax treatment, simplify compliance, and make India more attractive for global investment and manufacturing

Finance Minister Nirmala Sitharaman on Tuesday introduced the Taxation and Other Laws (Amendment) Bill, 2026, in the Lok Sabha. Finance ministry officials said the objective was to make India a more attractive and predictable destination for global capital, manufacturing, and business.

 

The Bill seeks to replace the Income-tax (Amendment) Ordinance, 2026, promulgated in June. “Overseas players are often unsure whether operating in or through India will create an unexpected tax exposure. These proposals provide clear, stable, and predictable tax treatment, along with a defined process to obtain it,” a finance ministry official said.

 

The Bill eases the conditions for foreign investment funds and their managers operating in India. According to the finance ministry’s frequently asked questions (FAQs), the number of conditions an eligible investment fund must satisfy has been reduced from 13 to five. The change is aimed at enabling fund managers to relocate to India without the foreign fund being treated as having a business connection in the country. The proposal will apply nationwide, including in the International Financial Services Centre.

 

 

The Bill also simplifies rules for foreign Cloud companies using Indian data centres. Indian companies will also be allowed to operate specified data centres through ownership or leasing. Finance ministry officials said the earlier ownership-only requirement was restrictive, while removing the notification requirement would improve ease of doing business.

 

To support electronics manufacturing, the Bill extends by 10 years, until tax year 2040-41, the existing tax exemption for foreign companies supplying capital goods, equipment, or tooling to Indian contract manufacturers. The Bill also proposes a 15-year tax exemption, until March 2041, for foreign companies storing electronic components in Customs-bonded warehouses in India and supplying them to Indian contract manufacturers. Earlier, this activity was covered under a safe harbour with a presumptive tax of 2 per cent. Finance ministry officials said the exemption would make India more competitive and encourage just-in-time supply of components.

 

It also provides a 15-year tax exemption on income from the sale of rough diamonds by foreign mining companies, sightholders, brokers, aggregators, and auction entities in notified special zones in Mumbai and Surat, with the aim of shifting a larger share of the global rough diamond trade to India.

 

Finance ministry officials said several of the measures were also intended to reduce compliance burdens. Removing multiple approval layers for data centres, simplifying conditions for fund managers, and replacing the earlier safe harbour regime for component storage with a full exemption were expected to ease compliance.

 

Richa Sawhney, partner at Grant Thornton Bharat, said, “The government’s continued practice of issuing detailed FAQs alongside important tax amendments reflects a constructive approach to improving clarity around tax policy changes. The FAQs accompanying the Bill provide useful insights into the stakeholder representations and policy considerations underlying certain amendments. Such guidance can help reduce ambiguity, support smoother implementation, and enhance tax certainty for taxpayers and businesses.”