- The Centre plans wide tax and regulatory changes to boost investment and manufacturing
- New legislation will replace the Income-tax (Amendment) Ordinance, 2026
- Government to regulate charges on electronic payment modes for clarity on fees
The Centre is likely to introduce a wide-ranging set of tax and regulatory changes aimed at boosting investment, manufacturing and digital payments. The legislation will also replace the Income-tax (Amendment) Ordinance, 2026. Among the key proposals is an overhaul of the legal framework governing digital payment charges.
The government will have the power to notify electronic payment modes on which banks and payment system providers cannot levy charges, replacing the existing framework linked to the Income-tax Act. The move will bring much awaited clarity on the merchant discount rates on digital payments.
The proposed changes also seek to exempt Foreign Institutional Investors (FIIs) and the Bank for International Settlements (BIS) from tax on interest income and capital gains arising from investments in Government securities, subject to prescribed conditions.
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To support manufacturing, the government proposes extending tax benefits for foreign companies supplying capital goods to electronics manufacturers till FY2040-41. It also proposes a tax exemption till FY2040-41 for foreign companies storing components in customs bonded warehouses for contract manufacturing in India.
The proposed changes further provide a tax exemption till FY2040-41 for foreign diamond mining companies and related entities selling rough diamonds through notified special zones.
The government also proposes to simplify the eligible investment fund regime, expand the definition of specified electronic goods, permit specified data centres to operate on owned or leased infrastructure, continue dividend tax exemption for business trust unit holders in certain cases, and levy a higher 25% surcharge on special purpose vehicles opting for the new tax regime.
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