- The Government proposed to substantially relax eligibility conditions for an Eligible Investment Fund (EIF) managed from India to avail tax exemption on its global income, removing thresholds such as 25 members, 10% single-investor participation, 25% corpus limits and ₹100 crore average corpus.
- The Taxation and Other Laws (Amendment) Bill, 2026 has been circulated among members of Parliament and is expected to be introduced by Finance Minister Nirmala Sitharaman in the Lok Sabha.
- For electronics’ contract manufacturing, the government proposed extending the five-year tax exemption by 10 years; foreign companies supplying capital goods, equipment or tooling for electronics manufacturing in India could avail the exemption till 2040-41.
- The Bill also proposed a new tax exemption for foreign companies undertaking the storage and sale of electronic components through customs bonded areas to Indian contract electronics manufacturers.
- The amendments seek to remove separate exemption conditions for funds operating from the International Financial Services Centre (IFSC), creating a uniform eligibility framework and eliminating ambiguity between IFSC and non-IFSC offshore funds.
- The Bill seeks to replace the June 5 Ordinance, which provided tax exemption on interest and capital gains made by FPIs from investments in G-Secs; the Ordinance was promulgated to attract foreign capital and ease pressure on the depreciating rupee due to the West Asia crisis.
- Under the revised offshore-fund framework, funds would need to meet only five conditions, including not being a resident of India, not controlling and managing directly or indirectly any business in India, and keeping direct investment by Indian residents at or below 5% of the corpus.
India's government has introduced the Taxation and Other Laws (Amendment) Bill, 2026, proposing substantial tax relief for offshore funds and extending benefits for electronics contract manufacturing.123
The Bill aims to simplify eligibility conditions for offshore funds, removing requirements such as a minimum investor threshold of 25 members and a maximum 10% participation interest for a single investor.
This move is expected to enhance India's attractiveness as a global fund management hub, with experts noting that it aligns India's fund management ecosystem with global standards.
“These proposed changes are expected to significantly enhance the attractiveness of India’s onshore fund management ecosystem for offshore funds,” said Abheet Sachdeva, Partner- M&A Tax, Nangia Global.
Additionally, the Bill extends tax exemptions for electronics contract manufacturing until 2040-41, allowing foreign companies providing capital goods to benefit from these provisions.45
“The result is a broader package designed to provide greater tax certainty and reinforce India's economic resilience,” noted Richa Sawhney, Grant Thornton Bharat partner-tax.
The government is likely to introduce the Bill in Parliament soon, aiming to attract foreign capital and bolster the economy amid global economic challenges.
The proposed amendments also seek to eliminate ambiguity between International Financial Services Centre (IFSC) and non-IFSC offshore funds, creating a uniform eligibility framework.78
Overall, these reforms are seen as a strategic shift towards long-term competitiveness in India's fund management sector.
“The Taxation and Other Laws (Amendment) Bill, 2026, expected to be introduced by Finance Minister Nirmala Sitharaman, would drop thresholds including 25-member minimum, 10% single-investor cap and ₹100 crore average corpus. It would also replace the June 5 Ordinance on FPI G-Sec tax exemption; earlier inflow schemes netted $40.81 billion.”
The Indian Express
