Lok Sabha clears Taxation and Other Laws (Amendment) Bill, 2026

The Lok Sabha on Thursday approved the Taxation and Other Laws (Amendment) Bill, 2026, which proposes changes to the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025, and the Finance Act, 2026. The legislation was introduced by Finance Minister Nirmala Sitharaman and replaces the Income-tax (Amendment) Ordinance, 2026, promulgated on 5 June 2026.

A key provision of the Bill extends the tax exemption available to foreign companies engaged in electronics manufacturing through contract manufacturers in India until FY2040-41. The benefit has also been extended to foreign companies that store components in customs-bonded warehouses for supply to domestic manufacturers.

The Bill also amends the Payment and Settlement Systems Act, 2007, enabling the Central Government to notify the applicability of the zero Merchant Discount Rate (MDR) framework for specified electronic payment systems, including UPI and RuPay transactions.

In addition, the legislation provides an income tax exemption on interest income and capital gains earned by Foreign Institutional Investors (FIIs) and the Bank for International Settlements (BIS) from investments in Indian government securities with effect from 1 April 2026.

The government said the amendments are aimed at strengthening India's electronics manufacturing ecosystem, providing greater policy flexibility for digital payment systems and encouraging foreign investment in government securities.

The Bill has been passed by the Lok Sabha and will now be taken up by the Rajya Sabha for consideration.

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