Legislative Developments: Notifications/Circulars
The Taxation and Other Laws (Amendment) Act, 2026 (Act No. 21 of 2026)
The Taxation and Other Laws (Amendment) Act, 2026 (Act No. 21 of 2026) received Presidential assent on 17 August 2026 and, save as otherwise provided, is deemed to have come into force from 1 April 2026. The Act introduces several amendments to the Income-tax Act, 2025, including provisions relating to business connection, tax exemptions for certain foreign entities, specified data centres and the surcharge applicable to certain domestic companies.
Schedule I relating to eligible investment funds has been substituted. Certain activities of eligible investment funds managed through eligible fund managers in India will not constitute a business connection in India, provided the prescribed conditions are satisfied. These include the Indian resident participation generally not exceeding 5% of the fund’s corpus, the fund not carrying on or controlling any business in India, and the eligible fund manager satisfying prescribed conditions, including that its entitlement to the fund’s profits does not exceed 20%.
Schedule IV has been amended to extend, from tax year 2030-31 to tax year 2040-41, the exemption available to certain foreign companies in relation to the supply of capital goods, equipment or tooling equipment to contract manufacturers engaged in the manufacture of specified electronic goods, subject to the prescribed conditions. With effect from 1 April 2026, exemption is provided to Foreign Institutional Investors (FIIs) and the Bank for International Settlements (BIS) in respect of interest on Government securities and capital gains arising from the sale, exchange or transfer of such securities, subject to the prescribed reporting requirements.
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