Govt Bets on Tax Incentives to Bring Global Capital to India Long-term tax relief for electronics, data centres and investment funds signals India’s push to become a preferred global investment destination.
As global companies rethink their supply chains and investment strategies, India is making a fresh pitch to foreign investors. Through the Taxation and Other Laws (Amendment) Bill, 2026, the Government has proposed a wide-ranging package of tax incentives aimed at attracting long-term capital, encouraging advanced manufacturing, and strengthening the country’s digital infrastructure.
From extending tax holidays for electronics manufacturers to simplifying rules for offshore investment funds and boosting data centre investments, the proposed reforms are designed to make India a more predictable and business-friendly destination.
“The message is clear: India wants long-term investors, not just short-term capital.”
Electronics Manufacturing Gets a Decade of Certainty
One of the biggest announcements is the 10-year extension of tax exemptions until 31 March 2041 for foreign companies supplying machinery and equipment to electronics manufacturers in India.
The benefit also covers foreign firms that store components in customs-bonded warehouses before supplying them to Indian contract manufacturers. The move is expected to support global technology giants such as Apple and Google, both of which continue to expand their manufacturing operations in India.
To reduce uncertainty, the Bill also replaces the broad term “electronic goods” with a clearly defined list of eligible products, including mobile phones, laptops and tablets. This is expected to minimise tax disputes and provide greater policy certainty for investors.
A Stronger Push for India’s Data Centre Ecosystem
India’s rapidly growing digital economy also receives a major boost.
The Bill proposes extending tax exemptions for foreign companies procuring services from specified Indian data centres until 31 March 2047. It also removes the requirement for separate government notifications and recognises leased data centres, not just company-owned facilities.
These changes are expected to make investments easier, reduce compliance hurdles, and accelerate the expansion of India’s data centre ecosystem.
“Lower compliance and greater flexibility could make India an even more attractive destination for global digital infrastructure investments.”
Relief for the Diamond Industry
Foreign diamond mining companies and related entities will continue to enjoy tax exemption on the sale of rough diamonds in India until March 2041.
The measure is expected to strengthen India’s position as one of the world’s leading centres for diamond trading and processing.
REIT and InvIT Investors Retain Their Tax Advantage
The Bill also restores tax neutrality for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) by ensuring that dividend income remains tax-free in the hands of investors, even when the underlying Special Purpose Vehicles (SPVs) opt for the concessional corporate tax regime.
To offset the revenue impact, however, the surcharge on such SPVs will increase from 10% to 25%, while the surcharge for other domestic companies remains unchanged.
India Opens the Door Wider for Global Investment Funds
The proposed reforms go beyond manufacturing.
The Government plans to significantly relax the eligibility conditions for Eligible Investment Funds (EIFs) managed from India. Several long-standing restrictions—including minimum investor requirements, investment concentration limits and the mandatory corpus requirement of ₹100 crore—are proposed to be removed.
The objective is simple: make India a more competitive destination for global fund managers and encourage international capital to be managed from within the country.
Supporting India’s Digital Payments Journey
The Bill also proposes amendments to the Payment and Settlement Systems Act, 2007. It empowers the Government to prevent banks and payment service providers from imposing charges on notified digital payment modes while removing outdated references to the repealed Income-tax Act.
The move reinforces India’s continued push towards a seamless and affordable digital payments ecosystem.
More Than Tax Relief—A Strategic Investment Signal
These measures come at a time when India is seeking to attract greater foreign capital while global businesses diversify their manufacturing and investment bases.
Rather than offering short-term incentives, the Government is signalling long-term policy stability. Extended tax holidays, simplified compliance requirements and easier investment rules are intended to improve investor confidence and enhance India’s ease of doing business.
Industry experts believe the reforms reflect a broader shift in policy—using taxation not merely as a revenue tool, but as a strategic instrument to attract investment, create jobs and strengthen India’s role in global value chains.
“Long-term policy certainty often matters as much as tax incentives—and this Bill seeks to provide both.”
At a Glance
✔ Electronics manufacturing tax benefits extended till 2041
✔ Data centre tax exemption extended till 2047
✔ Rough diamond trading exemption continues till 2041
✔ REIT and InvIT dividend tax benefits retained
✔ Surcharge on concessional-tax-regime SPVs increased to 25%
✔ Offshore investment fund rules significantly relaxed
✔ Government empowered to prohibit charges on notified digital payment modes
The Bottom Line
The Taxation and Other Laws (Amendment) Bill, 2026 is more than a package of tax concessions. It is a strategic effort to position India as a preferred destination for global manufacturing, digital infrastructure and long-term investment. By combining policy stability with targeted incentives, the Government is seeking to strengthen investor confidence and reinforce India’s place in an increasingly competitive global economy.
Disclaimer: This article is published for educational and informational purposes only and does not constitute investment advice, financial guidance, or a recommendation to buy or sell any security, currency, or financial instrument. InsightfulX is not a SEBI-registered investment advisor. Readers are advised to consult a qualified financial advisor before making any investment decisions. Views expressed are solely for awareness and learning purposes
