Government Plans Major Tax Reform Bill to Boost Foreign Investment and Manufacturing

New Delhi | August 4, 2026 The Indian government is preparing to introduce the Taxation and Other Laws (Amendment) Bill, 2026 during the ongoing Monsoon Session of Parliament, as part of its broader strategy to attract foreign investment, strengthen domestic manufacturing, and boost economic growth.

The proposed legislation includes a series of tax reforms designed to make India a more attractive destination for global investors. Key measures include extending tax incentives for electronics manufacturing, simplifying regulations for foreign investment funds, and offering tax relief to foreign investors in Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), data centres, and government bonds.

According to reports, the government is also considering extending tax exemptions for foreign suppliers that provide products to India's domestic electronics manufacturing sector. In addition, tax benefits may be expanded to cover investments in data centres and the diamond mining industry.

One of the most significant proposals is an amendment to the Income Tax Act that would extend tax incentives for contract manufacturing from the current expiry year of 2031 to 2041. The extension would cover electronic products such as mobile phones, laptops, tablets, and servers, providing long-term certainty to manufacturers and investors.

The government is also planning to convert an existing ordinance into law. The measure would continue tax exemptions for foreign institutional investors on interest earned from specified government securities, while also exempting capital gains arising from the sale or transfer of those securities.

The proposed reforms are part of the government's efforts to curb foreign capital outflows, support the Indian rupee, and strengthen the economy against global uncertainties, including geopolitical tensions. If approved, the measures could encourage a stronger return of foreign portfolio investment, potentially providing a significant boost to India's stock markets.

Finance Minister Nirmala Sitharaman is expected to table the bill before Parliament during the current session, which is scheduled to conclude on August 13. However, disruptions in Parliament over opposition demands for discussions on recent examination paper leaks and student protests have reduced the time available for legislative business, increasing pressure on the government to secure the bill's passage before the session ends.

Disclaimer: The information provided in this article is for general informational purposes only. While we endeavor to keep the information up to date and correct, News Setu makes no representations or warranties of any kind, express or implied, about the completeness, accuracy, or reliability of the content. Any reliance you place on such information is strictly at your own risk.