The Taxation and Other Laws (Amendment) Act, 2026 has received President’s assent on August 17, 2026, amending the Payment and Settlement Systems Act, 2007, Income-tax Act, 2025, and Finance Act, 2026. The Act is deemed to have come into force from April 1, 2026, except where otherwise provided.
Among key changes, the Act replaces the reference to electronic payment modes prescribed under the Income-tax Act, 1961 with electronic modes that may be specified by the Central Government through notification.
The amended Schedule I of the Income-tax Act, 2025 revises the conditions under which activities of eligible investment funds will not constitute a business connection in India. The framework includes a 5% ceiling on aggregate participation or investment by Indian residents, subject to specified exceptions and a four-month compliance window, while also prescribing conditions for eligible fund managers and annual reporting requirements.
The Act also expands and modifies tax exemptions under Schedule IV, including provisions concerning foreign institutional investors and the Bank for International Settlements. From October 1, 2026, exemptions are introduced for specified income from the sale of rough diamonds and income connected with storage of components in custom-bonded warehouses for manufacturing specified electronic goods, subject to prescribed conditions and time limits extending up to the tax year ending March 31, 2041.
The amendments further expand the definition of specified electronic goods to include mobile phones, laptops, all-in-one PCs, tablets, servers, sub-assemblies, hearables and wearables, and modify the definition of a specified data centre.
The Act also amends the Finance Act, 2026 to prescribe a 10% rate for domestic companies other than specified special purpose vehicles, while retaining a 25% rate for such special purpose vehicles under the amended provisions.
The Income-tax (Amendment) Ordinance, 2026 has been repealed, with a saving provision deeming actions already taken under the Ordinance to have been taken under the corresponding provisions of the new Act.