Tax Modification Invoice 2026 FAQs: CBDT explains proposed tax reduction for electronics manufacturing

What adjustments are proposed for offshore funding funds?

The Invoice proposes to simplify the circumstances governing an Eligible Funding Fund (EIF) in order that fund administration actions undertaken by means of an eligible fund supervisor in India don’t create a enterprise connection within the nation.

In line with the CBDT, the variety of qualifying circumstances is proposed to be lowered from 13 to 5.

Underneath the revised framework, an eligible fund have to be a non-resident entity, be resident in a rustic with which India has a Double Taxation Avoidance Settlement (DTAA) or in a notified jurisdiction, be sure that funding by Indian residents doesn’t exceed 5% of its corpus, chorus from carrying on or controlling any enterprise in India, and be sure that no particular person performing on its behalf undertakes actions that create a enterprise connection in India aside from these permitted for an eligible fund supervisor.

CBDT stated the adjustments are geared toward addressing trade representations in search of an easier regime that encourages international fund managers to relocate operations to India whereas offering higher tax certainty.

What adjustments are proposed for information centre providers?

The Invoice proposes to ease the tax exemption accessible to overseas corporations procuring information centre providers from specified services in India.

It seeks to take away the prevailing requirement for the Central Authorities to inform each the overseas firm and the desired information centre. It additionally proposes to increase the profit to information centres working underneath a lease mannequin.

In line with the CBDT, these notification necessities are proposed to be allotted with as a result of each overseas cloud service suppliers and Indian information centre operators will as a substitute be required to furnish prescribed data.

What tax proposal has been made for electronics manufacturing?

The Invoice proposes extending the tax exemption accessible to overseas corporations that present capital items, gear or tooling gear to Indian contract producers.

The profit, at the moment accessible till tax yr 2030-31, is proposed to be prolonged by one other 10 years, as much as tax yr 2040-41.

CBDT stated the modification additionally seeks to supply higher readability by defining the time period “specified digital items.”

The proposed definition covers cellphones, laptops, all-in-one private computer systems, tablets, servers, extremely small type issue (USFF) gadgets, sub-assemblies of those merchandise, in addition to hearables, wearables and associated equipment.

Is there a proposal for overseas corporations storing digital parts?

Sure.

The Invoice proposes a recent exemption for overseas corporations that retailer digital parts in warehouses situated in customs bonded areas for onward provide to Indian contract producers producing specified digital items.

In line with the FAQs, the exemption will apply to revenue arising from the sale of such parts.

The Indian contract producer should manufacture specified digital items on behalf of the overseas firm, whereas the overseas firm can be required to furnish data within the prescribed method.

The proposed exemption would stay accessible for 15 years, as much as tax yr 2040-41.

What’s proposed for the tough diamond commerce?

The Invoice proposes a brand new tax exemption for eligible overseas corporations engaged within the tough diamond commerce.

The profit would apply to revenue earned from the sale of tough diamonds by means of Particular Notified Zones (SNZs) situated in Mumbai and Surat.

Eligible entities embody overseas mining corporations in addition to sightholders, brokers, aggregators, and entities conducting tenders or auctions.

The proposed exemption can be accessible for 15 years, ending with tax yr 2040-41.

What adjustments are proposed for REITs and InvITs?

The Invoice proposes to revive the tax exemption on dividend revenue obtained by unit holders of enterprise trusts even when the underlying particular objective automobile (SPV) has opted for the brand new tax regime.

At present, this exemption is offered provided that the SPV continues underneath the outdated tax regime.

To offset the income influence of the proposed change, the Invoice additionally proposes a further 15% surcharge on such SPVs.

When will these proposals take impact?

The provisions contained within the Taxation and Different Legal guidelines (Modification) Invoice, 2026 will grow to be efficient solely after the laws is handed by Parliament and receives the President’s assent.