Parliament Clears Key Taxation Bill Offering Certainty to Investors and Digital Payments

Amid persistent disruptions in the Lok Sabha, the government on Thursday secured passage of the Taxation and Other Laws (Amendment) Bill, 2026, a legislation aimed at boosting domestic electronics manufacturing, attracting foreign investment, and strengthening India's digital payments ecosystem.

The Bill was passed by a voice vote without any debate as Opposition members continued sloganeering over multiple issues, including allegations related to donations at the Ram Temple in Ayodhya. Following its passage, the House was adjourned for the day.

The legislation replaces the ordinance promulgated on June 5 and introduces several measures intended to improve policy certainty for global investors. A key provision extends income tax exemptions until 2040-41 for foreign companies that engage contract manufacturers in India to produce specified electronic products, including mobile phones, laptops, tablets, personal computers, servers, and related components.

To strengthen supply chains, the Bill also grants a 15-year income tax exemption to foreign firms storing electronic components in customs warehouses for onward supply to contract manufacturers operating in India.

Another significant amendment removes approval and notification requirements for foreign cloud companies using Indian data centres. It also permits such facilities to operate on a leased basis, a move expected to simplify investments and expand digital infrastructure.

The Bill further delinks the Payment and Settlement Systems Act, 2007 from the Income Tax Act, providing legal backing for the government to determine, through notifications, which digital payment modes should continue to remain free of merchant charges. Currently, users are not charged for transactions made through UPI and RuPay debit cards.

It also eases tax conditions for foreign fund managers relocating to India and retains tax exemptions on interest income and capital gains earned by foreign portfolio investors from investments in government securities.

According to Finance Ministry sources, the amendments are designed to make India a more predictable and competitive destination for global capital, advanced manufacturing, and long-term business investment while supporting the country's rapidly expanding digital economy.