The Central Board of Direct Taxes (CBDT) has released a comprehensive Frequently Asked Questions (FAQ) document to explain the key proposals contained in the Taxation and Other Laws (Amendment) Bill, 2026, which was introduced in the Lok Sabha today.
The move is aimed at improving taxpayer awareness and helping stakeholders understand the proposed amendments in a simple and transparent manner. According to CBDT, the FAQ document provides concise explanations of the major provisions of the Bill and their expected impact on taxpayers, businesses, foreign investors, and industry participants.
CBDT Issues FAQs for Better Understanding of Proposed Amendments
In its official X handle , CBDT said:
"As part of its continued efforts to enhance taxpayer awareness and facilitate a better understanding of the amendments proposed in the Bill, CBDT has issued a comprehensive FAQ document on the Bill."
The FAQs cover several important tax proposals aimed at boosting India's manufacturing ecosystem, attracting foreign investment, promoting data centre infrastructure, strengthening the diamond trading sector, and simplifying tax provisions for investment funds and business trusts.
Major Highlights of the Taxation and Other Laws (Amendment) Bill, 2026
1. Tax Exemption Extended for Foreign Electronics Manufacturers
The Bill proposes extending the tax exemption available to foreign companies that provide capital goods, equipment, or tooling to Indian contract manufacturers engaged in producing specified electronic goods.
The exemption period, originally available up to Tax Year 2030-31, is proposed to be extended by another 10 years until Tax Year 2040-41. The Bill also introduces a clear definition of "specified electronic goods," including:
- Mobile phones
- Laptops and tablets
- All-in-one personal computers
- Servers and USFF devices
- Sub-assemblies
- Wearables, hearables, and related accessories
2. Simplified Tax Rules for Data Centre Services
To support India's rapidly growing data centre sector, the Bill proposes relaxation of certain conditions applicable to foreign companies procuring data centre services from Indian facilities.
Key changes include:
- Removal of government notification requirements for foreign companies and specified data centres.
- Allowing leased ownership models for Indian data centres.
- Replacing approval-based conditions with prescribed compliance requirements.
CBDT stated that these changes are intended to improve ease of doing business and encourage greater participation in India's digital infrastructure ecosystem.
3. New Tax Exemption for Foreign Diamond Mining Companies
The Bill introduces a new exemption for foreign mining companies engaged in the sale of rough diamonds.
The exemption will apply when rough diamonds are sold through Special Notified Zones (SNZs) located in Mumbai and Surat and subject to prescribed reporting requirements. The benefit is proposed to remain available until March 31, 2041.
4. Relief for Foreign Companies Storing Components in Bonded Warehouses
A new exemption is proposed for foreign companies that store electronic components in customs-bonded warehouses and supply them to Indian contract manufacturers producing specified electronic goods.
The proposal seeks to strengthen India's electronics manufacturing supply chain and improve the attractiveness of India's contract manufacturing ecosystem. The exemption is proposed for a period of 15 years, up to March 31, 2041.
5. Dividend Tax Relief for Business Trust Investors
The Bill proposes to extend dividend tax exemption benefits to unit holders of business trusts even when the Special Purpose Vehicle (SPV) has opted for the new tax regime.
Currently, such exemption is available only when the SPV follows the old tax regime. To offset revenue implications, an additional surcharge of 15% is proposed on SPVs that opt for the new regime.
6. Easier Conditions for Foreign Investment Funds
The proposed amendments also seek to simplify eligibility conditions for foreign investment funds whose fund managers relocate to India.
The number of qualifying conditions is proposed to be reduced from 13 to 5, making the framework more investor-friendly and providing greater tax certainty for global funds operating through India-based fund managers.
Objective Behind the Amendments
The proposed changes reflect the Government's broader strategy of promoting manufacturing, electronics production, data centre investments, international financial services, and ease of doing business.
By rationalising compliance requirements and extending tax incentives, the amendments are expected to improve India's competitiveness as a destination for global investment while providing greater clarity and certainty under the Income-tax Act, 2025.
Access the CBDT FAQ Document: Click Here
Taxpayers, professionals, businesses and other stakeholders can refer to the detailed FAQ document issued by CBDT for a clause-by-clause explanation of the proposals contained in the Taxation and Other Laws (Amendment) Bill, 2026.
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