- Parliament passed a bill targeting specified foreign investors and multinational businesses without broad exemptions.
- The legislation simplifies the offshore-fund safe harbour by removing four specific compliance conditions.
- Tax relief focuses on specific sectors and institutions rather than individual non-resident Indian investors.
Parliament passed a tax bill targeting specified foreign investors and multinational businesses, but it stopped short of creating a blanket exemption for overseas taxpayers.
The Lok Sabha approved the measure on August 6, 2026, after its introduction on August 4. The Rajya Sabha passed it on August 10, 2026. The Bill now awaits Presidential assent and publication of the final Act in the Gazette.
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The measure is the Taxation and Other Laws (Amendment) Bill, 2026. It would replace the Income-tax (Amendment) Ordinance, 2026, while making further changes to the Income-tax Act, 2025 and the Finance Act, 2026.
Its benefits are tied to defined institutions, funds, companies and transactions. Most overseas individuals do not qualify simply because they invest in India.
The Bill also covers targeted provisions affecting foreign institutional investors and investors connected with Indian business trusts. The eligibility language, however, remains central to any claim for relief.
The final text must be checked before investors change structures or classify income as exempt. Passage by Parliament alone does not settle every condition.
Government-securities relief follows the investor, not simply the investment
The proposed government-securities exemption covers a Foreign Institutional Investor as defined by the Income-tax Act, 2025, and the Bank for International Settlements. It applies to specified interest and gains.
The covered income includes interest on government securities and capital gains arising from their sale, exchange or transfer. The provision is intended to apply to qualifying income arising on or after April 1, 2026, subject to prescribed information being furnished in the required form and manner.
An NRI who buys Indian government securities in an individual capacity does not automatically become a qualifying institution. Legal status, registration, investment route and the final statutory conditions remain relevant.
The same restriction applies to foreign citizens and individual portfolio investors. Buying an eligible asset does not, by itself, place the buyer inside the statutory category.
India drops four proposed conditions from the offshore-fund safe harbour
The Bill would simplify the safe-harbour framework for eligible offshore investment funds whose managers operate from India. The framework is intended to prevent a qualifying fund from being treated as having a business connection in India merely because an eligible manager works there.
That protection remains conditional. The proposal would remove four specified requirements:
| Existing condition | Proposed treatment |
|---|---|
| Minimum of 25 fund members | Requirement removed |
| 10% limit on participation by one member | Limit removed |
| Restriction on investing more than 25% of the fund corpus in one entity | Restriction removed |
| Minimum monthly average corpus of Rs. 100 crore | Requirement removed |
Several safeguards would continue. They include the fund’s foreign residence, limits on participation by Indian residents, restrictions concerning the fund’s activities in India and the eligibility of the Indian fund manager.
The proposal therefore changes selected compliance conditions, not the entire framework. A fund must still examine its investor composition and its activities in India.
Fund managers may find India easier to use as an operating base
The safe harbour is mainly relevant to international asset managers and fund sponsors considering an Indian fund-management presence. Offshore funds have traditionally examined whether locating management teams in India could create a taxable Indian presence.
A simplified framework may make India more attractive for those operations. The relief does not answer every cross-border tax question.
Funds would still need to review their foreign residence, management arrangements, reporting requirements and transactions with connected persons. Treaty residence and permanent-establishment issues may require separate analysis.
The proposal is not a general concession for an individual managing personal overseas investments from India. Its structure is aimed at qualifying funds and their eligible managers.
Foreign-company incentives focus on four defined activities
The Bill contains targeted provisions for foreign companies involved in data-centre services in India, electronics manufacturing and contract-manufacturing supply chains, storage of components in customs-bonded warehouses, and sales of rough diamonds through notified special zones.
Those measures are industry-specific. They do not amount to a broad reduction in India’s corporate tax rates.
Eligibility would depend on the company’s activity, the transaction, its location, prescribed reporting and the effective date of the particular provision. A multinational business would need to match its operations to the enacted statutory language.
The selected sectors include data infrastructure, manufacturing, logistics and diamond trading. The Bill does not turn every foreign company operating in India into an automatic beneficiary.
Most NRI tax treatment remains outside the new measures
The immediate effect on most NRIs is indirect. The fund provisions could influence the attractiveness of Indian investment funds, REITs and InvITs.
Sector incentives could also encourage international financial and technology businesses to establish or expand Indian operations. Individual tax treatment remains a separate question.
An NRI should not assume that the Bill changes the ordinary taxation of salary, bank interest, rental income, property sales or individual share transactions. Those areas continue to depend on generally applicable income-tax rules, relevant tax treaties and the person’s residential status.
The Bill’s targeted categories therefore should not be treated as a personal exemption. An individual investor’s treatment will depend on the nature of the income and the person’s legal and tax position.
Before relying on a benefit, investors should check:
- Whether the President has assented to the Bill and the final Act has been published in the Gazette.
- Whether the enacted language differs from the Bill passed by Parliament.
- The exact effective date of the relevant amendment.
- Whether the investor or transaction fits the applicable statutory definition.
- Whether a prescribed form, registration or information statement is required.
The first proposed relief illustrates why timing matters. Its intended coverage begins with qualifying income arising on or after April 1, 2026, but investors must apply the final enacted language and any prescribed conditions.
The Bill is an investment-policy measure for specified institutional investors, qualifying offshore funds and foreign companies in selected sectors. It is not a universal foreign-investor tax exemption.
Presidential assent and Gazette publication are the next formal steps identified in the material. Until the final text is available, NRIs and individual foreign investors should not treat the Bill’s passage as proof that their income is exempt.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA about your specific situation.
