Taxation Bill Advancing Electronic Manufacturing Passes Lok Sabha
The Lok Sabha has passed the Taxation and Other Laws (Amendment) Bill without discussion, amid disruptions from Opposition members. The legislation aims to attract more foreign capital to India and enhance domestic electronics manufacturing. Following the bill’s passage, the House was adjourned for the day.
Key Provisions of the Bill
The Taxation and Other Laws (Amendment) Bill seeks to separate the Payment and Settlement Systems Act from the Income Tax Act. It provides a legal framework for the government to modify the existing zero-MDR regime for UPI and RuPay card payments. Currently, banks and payment system providers cannot impose charges on users making payments through these platforms. The proposed changes would empower the Central government to specify which electronic payment modes must remain free of charges.
The bill will replace an ordinance issued on June 5, which granted income-tax exemptions on interest income and capital gains for foreign portfolio investors in government securities. Additionally, it aims to facilitate the relocation of fund managers to India by easing conditions that prevent their global income from being taxed in the country.
Support for Electronics Manufacturing
To bolster domestic manufacturing, the bill extends the income-tax exemption for foreign companies engaging contract manufacturers in India until the fiscal year 2040-41. It covers a range of electronic products, including mobile phones, laptops, and servers. Furthermore, the legislation proposes a 15-year income tax exemption for foreign companies storing electronic components in customs-bonded warehouses before supplying them to contract manufacturers in India.
The bill also simplifies the regulatory framework for foreign cloud service providers. It removes existing approval and notification requirements for using Indian data centres and allows these centres to operate on leased infrastructure rather than requiring direct ownership. According to Finance Ministry sources, these measures aim to make India a more predictable and attractive destination for global investment and business operations.
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