Govt introduces Bill aimed at easing doing business, attracting FDI & enhancing Make in India
The Taxation and Other Laws (Amendment) Bill, 2026 will amend the Payment and Settlement Systems Act, 2007, Income-tax Act, 2025, and the Finance Act, 2026.
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Context
The Finance Minister introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha. The bill aims to amend several acts, including the , to attract foreign capital, improve ease of doing business, and boost the initiative by extending tax holidays for electronics manufacturing and easing rules for foreign fund managers and data centers.
UPSC Perspectives
Economic
The proposed amendments directly target Foreign Direct Investment (FDI) and domestic manufacturing under the initiative. By extending the tax exemption for foreign companies supplying capital goods to Indian electronics factories until 2040-41, the government seeks to solidify India's position in global supply chains, specifically for high-tech goods like mobile phones and servers. This tax holiday (a temporary reduction or elimination of a tax) is a crucial incentive to attract large-scale manufacturers like Apple, encouraging them to move production from other countries to India. Furthermore, easing the rules for foreign fund managers to relocate to India without facing adverse tax consequences aims to boost the domestic financial ecosystem, bringing high-value jobs and expertise. This aligns with broader economic goals of increasing gross capital formation and boosting manufacturing's share in GDP.
Governance
The bill represents a significant push towards improving the Ease of Doing Business (EoDB) in India by reducing regulatory friction and bureaucratic hurdles. A key governance reform is the removal of the multi-layered approval requirements for foreign cloud companies using Indian data centers. By allowing these data centers to operate on a leased basis, the government is fostering a more flexible regulatory environment. This shift from an ex-ante approval (requiring permission before action) to a more enabling framework is essential for attracting global tech players. This move aims to create a predictable and investor-friendly climate, crucial for sustained foreign investment, by demonstrating the government's commitment to cutting red tape and simplifying compliance.
Taxation
The amendments address specific challenges within India's complex tax regime. A critical provision is the restoration of tax exemptions for dividends paid by and . Under the new tax regime, these exemptions were withdrawn, potentially discouraging investment. By restoring the tax-free status for investors and instead levying a charge on the operating company, the government aims to maintain revenue neutrality while protecting small investors. This is vital for channeling retail savings into long-term infrastructure and real estate projects. UPSC often tests understanding of how tax policy impacts investment behavior; this amendment provides a clear example of using targeted tax incentives to stimulate specific sectors.