Summary of this article
Taxation Amendment Bill 2026 eases offshore fund rules to attract capital
UPI and RuPay transactions remain free unless separately notified later
Offshore fund managers may benefit from relaxed Section 9A tax conditions
Tax incentives for electronics, data centres and diamond trade receive extension
The Lok Sabha on August 6, 2026, passed the Taxation and Other Laws (amendment) Bill, 2026, which contains proposals affecting digital payments, foreign investment funds, electronics manufacturing, data centres, and rough diamond trading. The Bill amends the Income-tax Act, 2025, the Finance Act, 2026, and the Payment and Settlement Systems Act, 2007. It also replaces the Income-tax (amendment) Ordinance, 2026, without disturbing steps already taken under the Ordinance.
Says Rajesh Gandhi, partner, Deloitte India: “The amendment seeks to relax several requirements under the Section 9A regime to encourage greater fund management activity in India. Requirements applicable to offshore funds, and restrictions on investments in group companies, are proposed to be removed under the new Section 9(12) of the Income-tax Act, 2025.”
“This could encourage private equity firms, funds with master-feeder structures, and offshore funds with a relatively small India corpus to consider shifting their fund management activities to India without creating an adverse tax impact for the fund,” he adds.
1 August 2026
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Gandhi said it is also the right time to consider relaxing tax rules to allow global funds that invest Indian capital in overseas assets to benefit from this regime by permitting such funds to be managed from India. “This would be aligned with the growing expertise in India in managing global assets, as well as the increasing investments by high net-worth individuals (HNIs) and family offices in offshore securities,” he adds.
No UPI Charge Announced
The digital payment provision is likely to attract the most attention from individuals. The existing law links the prohibition on charges to electronic payment modes prescribed under the income-tax legislation. The Bill removes that reference.
Instead, the Centre will be able to notify payment modes on which banks and payment system providers cannot levy charges.
This, by itself, does not introduce a charge on Unified Payments Interface (UPI) or RuPay transactions. Nor does the Bill say that customers or merchants will have to pay for making or accepting such payments. Any change would depend on a separate government notification or policy decision. Users, therefore, should not treat the passage of the Bill as an immediate change in the cost of making digital payments.
Easier Conditions For Offshore Funds
The Bill also seeks to make it easier for overseas funds to appoint fund managers operating from India. Under the present framework, an offshore fund must meet several conditions to avoid creating a taxable business connection in the country solely because its manager is based here. These include conditions relating to the number of investors, the share held by individual investors, concentration of investment in one entity, and the fund’s monthly corpus. Several such requirements are proposed to be removed.
The relaxation could encourage global fund managers to shift more investment-management activity to India without exposing the entire overseas fund to an unintended tax liability here. Says Sumit Singhania, partner, Deloitte India: “The present set of changes carried out to income tax legislation underlines the government’s commitment to continually shape India’s progressive tax policy that adapts to a fast-moving geopolitical landscape and emerging trends of capital allocation by investors.”
He adds: “In particular, extended tax holiday periods for electronic goods manufacturers and relaxed eligibility conditions for data centres ought to enable investors to commit long-term capital into these sectors. Besides, rationalisation of tax immunity rules for foreign fund managers is both symbolic as well as a major step forward towards providing a transparent and reliable tax framework for foreign funds looking to leverage India as their global operations hub.”
Tax Relief For Selected Industries
Foreign companies supplying machinery and equipment for manufacturing electronic goods, such as mobile phones, laptops and tablets, will receive a longer period of tax relief. The government hopes this will support India’s electronics supply chain and bring more manufacturing activity into the country.
Eligible foreign businesses storing electronic components in customs-bonded warehouses may also receive concessions. The Bill provides relief for specified data-centre operations and foreign companies trading rough diamonds through notified zones. It also protects the tax treatment of certain dividend income distributed through real estate investment trusts (Reits) and infrastructure investment trusts (InvITs).
For retail users, the immediate takeaway is narrower: UPI has not become chargeable merely because the Bill has been cleared in the Lok Sabha. The larger thrust of the legislation is to draw foreign capital and business activity into India.
FAQs
1. Does the Bill introduce charges on UPI transactions?
No. The Bill does not impose any immediate charge on UPI or RuPay payments. Any change would require a separate government notification or policy decision.
2. How will offshore investment funds benefit?
The Bill relaxes several eligibility conditions for offshore funds using India-based fund managers, reducing the risk of creating an unintended taxable presence in India.
3. Which industries may receive tax relief?
The proposals cover electronics manufacturing, data centres, customs-bonded storage of electronic components and rough-diamond trading, along with certain Reit and InvIT dividends.
