India's tax amendment extends foreign investment exemption

Finance Minister Nirmala Sitharaman introduced two significant pieces of financial legislation in the Lok Sabha this week, focusing on regularizing past government spending and implementing new tax incentives aimed at attracting foreign investment. The moves are part of a broader effort to enhance India's business environment and manufacturing competitiveness.

On Tuesday, August 4, Sitharaman introduced the Taxation and Other Laws Amendment Bill, 2026. The legislation proposes amendments to several acts, including the Income-tax Act, 2025, and the Payment and Settlement Systems Act, 2007. A central provision extends an existing tax exemption for foreign companies supplying machinery and tooling to Indian electronics manufacturers. The exemption, which was set to expire after five years, would be extended by ten years, until the 2040-41 financial year. The bill specifies that the exemption applies to goods such as mobile phones, laptops, tablets, servers, wearables, and their key components.

The bill also seeks to simplify regulations for foreign cloud companies using Indian data centers by removing certain approval requirements and allowing data centers to be operated on a...