Background
India has been undertaking major tax reforms to create a predictable and investment-friendly tax regime.
The government had earlier promulgated the Income-tax (Amendment) Ordinance, 2026 to provide immediate relief in certain taxation matters.
The present Bill seeks to replace the Ordinance with a permanent law.
Growing investments in data centres, digital infrastructure, REITs (Real Estate Investment Trusts), InvITs (Infrastructure Investment Trusts), and global fund management require updated tax provisions to enhance India's competitiveness.
Appropriation Bill
Authorises the government to withdraw money from the Consolidated Fund of India to meet approved expenditure.
Required under Article 114 of the Constitution.
Demands for Excess Grants
Presented when actual government expenditure exceeds the amount approved by Parliament.
Examined by the Public Accounts Committee (PAC) before parliamentary approval.
Constitutional Basis: Article 115.
Bankers’ Books Evidence Bill, 2026
Seeks to modernise legal provisions governing bank records by recognising digital banking and electronic records.
Features
Amendment of Multiple Laws
The Bill amends:
Payment and Settlement Systems Act, 2007
Income-tax Act, 2025
Finance Act, 2026
Replaces the Income-tax (Amendment) Ordinance, 2026
Converts temporary provisions introduced through the Ordinance into permanent legislation.
Tax Benefits for Data Centres
Simplifies tax exemptions for foreign companies using Indian data centres.
Extends tax benefits to leased data centres, encouraging investment in digital infrastructure.
Encouraging Foreign Investment
Enables relocation of foreign fund managers to India without creating a taxable business presence (Permanent Establishment), thereby improving India's attractiveness as a global financial hub.
Support to REITs and InvITs
Restores dividend tax exemption for REITs and InvITs under the new tax regime.
Encourages investment in infrastructure and real estate sectors.
Payment System Reforms
Updates provisions relating to payment systems to align with India's rapidly evolving digital payment ecosystem.
Challenges
Revenue challenges: Tax breaks might lower revenue in the short run.
Tax avoidance challenges: A liberal tax framework for foreigners requires strict safeguards against abuse.
Implementation challenges: Good coordination between tax authorities and financial regulators is critical.
Balance of incentives and fairness: Tax incentives should not favour foreign businesses unfairly over domestic businesses.
Policy certainty: Continuous policy changes might cause uncertainty in the event of unstable implementation.
Conclusion
The Taxation and Other Laws (Amendment) Bill, 2026 is yet another example of India’s continuous process of reform in its tax system. Through the provision of tax certainty, facilitation of digitalisation infrastructure, foreign investments, and capital markets, the Bill aims at ensuring that India remains an easy country to do business in.
