The Taxation and Other Laws (Amendment) Bill, 2026 is a legislative proposal, a type of Bill, introduced in the Lok Sabha on August 4, 2026. It was created to replace and ratify the Income-tax (Amendment) Ordinance, 2026, which was issued on June 5, 2026. The Bill's primary objective is to align India's tax architecture with emerging priorities, such as attracting foreign investment, promoting the 'Make in India' initiative, and strengthening the digital financial ecosystem.
The Bill works by amending three major laws: the Income-tax Act, 2025, the Finance Act, 2026, and the Payment and Settlement Systems Act, 2007. A key provision is the extension of tax incentives for electronics manufacturing, which extends the tax exemption for foreign companies supplying capital goods for contract manufacturing of specified electronic goods, such as mobile phones and laptops, until the tax year 2040-41. It also exempts Foreign Institutional Investors (FIIs) and the Bank for International Settlements (BIS) from income tax on interest and capital gains from investments in government securities, effective from April 1, 2026.
The Bill connects to the concept of Business Trusts (like REITs and InvITs) by restoring tax-free dividend income for unit holders, while simultaneously raising the surcharge on their Special Purpose Vehicles (SPVs) from 10% to 25% if the SPV opts for concessional tax rates. Furthermore, it amends the Payment and Settlement Systems Act, 2007 to allow the Central Government to enable the levy of Merchant Discount Rate (MDR) on UPI and other notified electronic payment modes, which was previously prohibited under Section 269SU of the Income-tax Act, 1961. The Bill was passed in the Lok Sabha on August 6, 2026.