Presidential Assent Granted to India's Taxation and Other Laws (Amendment) Act, 2026, Boosting Investment and Digital Payments

The Indian President granted assent to the Taxation and Other Laws (Amendment) Act, 2026, on August 17, 2026, formalizing a comprehensive set of reforms designed to bolster India's economic landscape. This crucial legislation amends several existing acts, including the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025, and the Finance Act, 2026, signifying a strategic move by the government to enhance the ease of doing business and attract foreign investment. Key provisions of the new Act focus on simplifying the regulatory environment for foreign investment funds operating with Indian managers by reducing the number of eligibility conditions. It also extends income tax exemptions for foreign companies that engage in contract manufacturing of specified electronic goods in India, pushing the exemption period until the financial year 2040-41. This is a significant boost for India's ambition to become a global electronics manufacturing hub. Furthermore, the Act streamlines tax exemptions for foreign companies utilizing Indian data centers, providing greater clarity and certainty. In a move to rationalize financial markets, the Act introduces tax exemptions for Foreign Institutional Investors (FIIs) and the Bank for International Settlements (BIS) on interest and capital gains from government securities. While the legislation also addresses aspects of digital payments, clarifying that UPI transactions for consumers will remain free, it signals potential merchant discount rates (MDR) for certain merchant categories, which will be determined by the NPCI's UPI and Services Steering Committee. Additionally, a higher surcharge of 25% is imposed on special purpose vehicles of business trusts that opt for concessional tax regimes. These amendments reflect the government's commitment to a stable, predictable, and growth-oriented policy framework.