In shortThe Taxation and Other Laws Amendment Bill 2026 became law on 17 August 2026. It exempts foreign portfolio investors' interest and capital gains on Indian securities from 1 April 2026, gives foreign diamond and electronics companies tax breaks until 2040-2041, and grants the government power to set merchant discount rates on electronic payments like UPI.
Key facts
- Bill number
- Bill No. 150 of 2026
- Introduced in
- Lok Sabha
- Ministry
- Ministry of Finance
- Introduced on
- 4 August 2026
- Lok Sabha
- 6 August 2026
- Rajya Sabha
- 10 August 2026
- Assent
- 17 August 2026
- Status
- Passed by both Houses and assented to by the President on 17 August 2026; it replaces an ordinance promulgated on 5 June 2026, and individual provisions take effect on dates specified in the Act rather than all at once.
Where this bill stands
Introduced
Lok Sabha
Rajya Sabha
Assent
In force
This Act converts an ordinance issued on 5 June 2026 into permanent law and makes a set of targeted changes to the Income tax Act, 2025 and to the Payment and Settlement Systems Act. Most of it is aimed at attracting foreign capital and manufacturing investment into India rather than at ordinary taxpayers.
On the tax side, interest income and capital gains earned by foreign portfolio investors and by the Bank for International Settlements on Indian government securities are exempted with effect from 1 April 2026. Foreign companies operating in diamond mining and in electronics manufacturing get exemptions running from 1 October 2026 through the 2040 to 2041 assessment year, and foreign suppliers of capital goods to Indian electronics manufacturers get a similarly long window. Conditions are relaxed for funds registered abroad but managed from India. Surcharge on special purpose vehicles of business trusts rises to twenty five percent, and exemptions for data centre services are widened.
The payments amendment is the part most people will notice. It gives the government express power to notify which electronic payment modes stay free of merchant discount rate charges, effectively allowing the zero MDR regime on UPI and RuPay to be modified. The Finance Minister has said consumers will continue to pay nothing.
Frequently asked questions
When did the Taxation and Other Laws Amendment Bill 2026 come into force?
The Bill was assented to by the President on 17 August 2026. Individual provisions take effect on dates specified in the Act. Foreign investor exemptions apply from 1 April 2026, and foreign company exemptions from 1 October 2026.
Which foreign investors get tax exemptions under this Bill?
Foreign portfolio investors and the Bank for International Settlements get exemptions on interest income and capital gains earned on Indian government securities, effective from 1 April 2026.
What tax benefits do foreign companies get under this Bill?
Foreign companies in diamond mining and electronics manufacturing get exemptions running from 1 October 2026 through the 2040-2041 assessment year. Foreign suppliers of capital goods to Indian electronics makers get similar benefits.
Will UPI and RuPay charges change under this Bill?
The Bill gives the government power to notify which electronic payment modes remain free of merchant discount rate charges. The Finance Minister stated consumers will continue to pay nothing for UPI and RuPay transactions.
Which Acts does this Bill amend?
The Bill amends the Income Tax Act, 2025 and the Payment and Settlement Systems Act. It converts an ordinance issued on 5 June 2026 into permanent law with targeted changes for foreign investment.
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