The government introduced a Bill in Lok Sabha on Tuesday to ease rules for foreign fund managers, extend tax breaks for electronics contract manufacturers and bring tax relief for a section of investors, as New Delhi works to shore up investor confidence at a time of global economic uncertainty.The Taxation and Other Laws (Amendment) Bill, 2026, tabled by Finance Minister Nirmala Sitharaman, seeks to amend the Income Tax Act, 2025—which took effect in April—as well as the Finance Act, 2026, and the Payment and Settlement Systems Act, 2007.“In recent months, on account of evolving geopolitical developments and related disruptions in international trade and supply chains, the global economic landscape has undergone considerable uncertainty,” the government said in the statement of objects and reasons accompanying the Bill. It said the changes were needed to mitigate the impact of external economic shocks, ensure stability in the domestic economy and support key sectors affected by prevailing global conditions.Also Read: India's IIP Growth Rises to 23-Month High on Manufacturing SurgeFor offshore fund managersOne of the key changes proposed is relaxing the rules that allow an offshore fund managed from India to avail of tax exemption on its global income.The Bill cuts the number of conditions an offshore fund must satisfy to qualify for this safe harbour from 13 to five.The five conditions require that the fund not be resident in India; that it be based in a country or specified territory having a DTAA (Double Taxation Avoidance Agreement, a treaty between countries that helps ensure the same income is not taxed twice) with India or in a notified jurisdiction; that Indian residents’ stake in the fund not exceed 5 percent of its corpus; that the fund—neither directly or indirectly—carry on or control any business in India; and that no one acting on the fund’s behalf create a business connection in India beyond the fund manager’s ordinary activities.Nehal Sampat, partner at Price Waterhouse & Co LLP, says over the years, compliance with certain requirements under the regime had proven somewhat restrictive for offshore funds.

“Particularly conditions relating to a minimum corpus of Rs100 crore, prescribed remuneration for onshore fund managers, and limitations on investments in associate entities.”He says the changes should make it more attractive for offshore funds to base their managers in India as they mitigate potential tax issues. "This will encourage the growth of the domestic asset management industry, as Indian fund managers can play a larger role and manage more AUM," he explains.On the changes this amendment will bring to the industry, Sampat says onshore fund managers, which usually act as investment advisers, can assume larger responsibilities and perform more functions with respect to investment management and execution for their offshore fund clients. “Over a period of time, this should lead to the growth of the domestic asset management industry and the entire ecosystem supporting the industry. This will enable them to compete with global asset managers and eventually lead to larger revenues for the exchequer.”Sameer Gupta, national tax leader at EY India, says the relaxation goes to the heart of India’s pitch to global asset managers. “Key relaxations include removal of investor diversification, investment concentration norms, minimum remuneration thresholds and restrictions on investments in associates.” He adds: “These changes should give the much-needed flexibility to fund managers and significantly enhance India’s competitiveness as a fund management destination for both India-focussed and global investment strategies.

The Bill provides greater flexibility to fund managers and should strengthen India’s competitiveness as a destination for both India-focussed and global investment strategies.”Also Read: India's moment is not about austerity. It is about productive powerDividend AnomalyThe Bill also removes a quirk in how dividends are taxed when they flow from a business trust—the structure used by real estate investment trusts (REITs) and infrastructure investment trusts (InvITs)—to its unit holders.Under the current rules, dividends paid by a special purpose vehicle (SPV)

held by a business trust are tax-exempt for unit holders only if the SPV is taxed under the old corporate tax regime. If the SPV has opted into the new regime introduced under the 2025 tax code, unit holders lose the exemption and pay tax on the dividend instead, at rates that can run as high as 35 percent depending on the investor’s category and jurisdiction.The Bill deletes that condition, so dividends will be exempt for unit holders regardless of which regime the underlying SPV has chosen. To offset the resulting revenue loss, the government proposes to levy an additional surcharge of 15 percent on the SPVs in the new tax regime.EY’s Gupta says the earlier rule had taxed investors in SPVs under the new regime at rates of 10 to 35 percent depending on the category of the investor and their jurisdiction. “The proposal creates uniformity. This was a long-standing ask from the investor community and we should now see a valuation uptake as well as increased investments (both domestic and foreign)

in business trusts in India.”On an overall basis, he says, the exemption in the hands of the investors is a preferred outcome and should completely offset the increase in surcharge at the corporate tax level of the SPV.Manufacturing BoostThe Bill provides a 15-year tax exemption—till tax year ending on March 31, 2041—for foreign companies that supply capital goods, equipment or tooling to India-based contract manufacturers producing electronics such as mobile phones, laptops, tablets, servers and wearables.Two new exemptions have been added. One covers income earned by a foreign diamond mining company, sightholder, broker, aggregator or a tender and auction entity for such business from selling rough diamonds. The sale has to be through any special notified zone.

This is also available for 15 years through the tax year ending March 2041.The other exempts foreign companies that store components for electronics contract manufacturers in bonded warehouses, also for 15 years, as the government tries to build out the “China plus one” electronics supply chain that has drawn manufacturers such as Apple’s contract partners to India.Separately, the government has relaxed rules for foreign companies that procure data centre services from centres that are owned and operated by an Indian company and are set up under an approved scheme and notified by the government.A prior requirement that both the foreign company and the data centre be individually notified by the government has been scrapped, and Indian companies will now be able to qualify by leasing a data centre rather than owning it outright, a change the finance ministry describes as a response to industry complaints that the ownership condition was somewhat restrictive in the sense that an Indian data centre may be operated by an Indian company after it has been procured on lease basis.