The Lok Sabha has passed the Taxation and Other Laws (Amendment) Bill, 2026, bringing several important changes for investors, businesses and taxpayers.
The Bill replaces the Income-tax (Amendment) Ordinance, 2026, which was introduced in June.
From UPI payments and foreign investments to electronics manufacturing, diamond trading and data centres, the new Bill covers several major areas.
But what does it actually mean for ordinary people and businesses? Here are the key changes explained simply.
UPI Payments Will Remain Free for Customers
For regular UPI users, there is an important clarification.
UPI payments will continue to be free for customers for now.
The Bill does not introduce any immediate charge on people making UPI payments.
However, it gives the government the power to introduce charges on UPI transactions in the future.
Finance Minister Nirmala Sitharaman has clarified that if a Merchant Discount Rate (MDR) is introduced, it would be charged to merchants rather than customers.
The government says such charges, if introduced, could help banks and fintech companies invest more in payment infrastructure and security.
Big Tax Relief for Foreign Investors
The Bill provides a major tax benefit to Foreign Portfolio Investors (FPIs) and the Bank for International Settlements (BIS).
From April 1, 2026, they will not have to pay tax on interest earned from Indian government securities or on capital gains from selling these securities.
Earlier, FPIs were subject to tax on such income, including 20% on interest from government bonds, along with applicable rates on short-term and long-term capital gains.
The change is aimed at making Indian government securities more attractive to international investors.
Foreign Investment Funds Get Easier Rules
The government has also relaxed several rules for overseas investment funds that are managed from India.
Earlier, these funds had to meet conditions related to the number of investors, fund size and how much money could be invested by a single investor.
The new Bill removes several of these restrictions.
For example, the earlier requirements included having at least 25 investors, limiting one investor’s participation to 10%, maintaining an average monthly fund size of at least ₹100 crore, and restricting investment in a single company to 25% of the fund’s total corpus.
Relaxing these conditions could make it easier for more global investment funds to operate from India.
More Tax Benefits for Electronics Manufacturing
The electronics manufacturing sector is another major beneficiary of the Bill.
Foreign companies will get tax exemptions on certain income earned from storing components in customs-bonded warehouses before supplying them to Indian contract manufacturers.
The benefit covers specified electronic products such as mobile phones, laptops, servers and sub-assemblies.
These exemptions will apply to eligible income earned from October 1, 2026, to March 31, 2041.
The government has also extended an existing tax benefit for foreign companies supplying capital goods, equipment and tooling to electronic goods manufacturers.
This benefit, which was earlier available until FY31, has now been extended by another 10 years, up to FY41.
Tax Relief for Diamond Trading Companies
The diamond industry also gets a boost under the new Bill.
Foreign companies involved in trading rough diamonds in notified special zones will receive tax exemptions until 2041.
The government hopes this will strengthen India’s position as a major global centre for diamond trading.
Relief for REIT and InvIT Investors
The Bill also changes some tax rules for investors in REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts).
Investors will no longer have to pay tax on certain dividend income received from special purpose vehicles through these trusts.
However, there is also a tax increase in another area.
The surcharge on special purpose vehicles that choose concessional tax rates has been increased from 10% to 25%.
Data Centre Rules Made Easier
The government is also trying to make India more attractive to global technology companies by simplifying tax rules related to data centres.
Earlier, only certain government-approved and notified data centres could qualify for specific tax exemptions.
Under the new changes, these conditions have been removed.
Leased data centres operated by Indian companies will also qualify, making it easier for international technology companies to use India’s growing digital infrastructure.
What Does the Bill Mean Overall?
The new Taxation and Other Laws (Amendment) Bill, 2026, covers several important parts of India’s economy.
For ordinary UPI users, there is no immediate charge on UPI payments.
For foreign investors, the Bill offers major tax relief on certain government securities and simplifies rules for some investment funds.
At the same time, electronics manufacturing, diamond trading and data centre businesses receive new or extended tax incentives.
The broader aim is to attract more foreign investment, global companies and advanced manufacturing activity to India while strengthening key sectors of the economy.
