India Seeks to Attract Global Capital with New Tax Reliefs

A new set of tax reliefs placed for Parliament consideration on Tuesday could make India a more attractive and predictable place for global capital, manufacturing and business to come and stay, a finance ministry source said. “India wants global investment funds, cloud businesses, and infrastructure investors to route more of their activity through the country,” the source said. Finance Minister Nirmala Sitharaman introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha on Tuesday, proposing a slew of tax concessions aimed at attracting foreign investment, supporting domestic manufacturing, and improving ease of doing business in the country. “Overseas players are often unsure whether operating in or through India will create an unexpected tax exposure. These proposals provide clear, stable and predictable tax treatment as well as the process to get the desired tax treatment,” the source added. The Bill offers extended tax holidays for contract manufacturers and warehouses of electronic goods. It also eases conditions for foreign companies to operate data centres from India, and for India-domiciled foreign funds to avail tax exemption on their global income. “India wants global investment funds, cloud businesses, and infrastructure investors to route more of their activity through the country,” the ministry source said. The Bill makes it easier for a fund manager to relocate to India without the foreign fund being treated as doing business in India, which is expected to promote fund management activity and provide tax certainty. “The expectation is that many managers of global funds will move to India, bringing high value activity and jobs with them,” the source said. The amendment was proposed following “persistent representations” from stakeholders to reduce the conditions for a fund manager to move to India without the offshore fund forming a business connection in India. The Bill also makes it easier for foreign companies to run data centres in India, aiming to attract large investment. The government expects to see large “AI data cities” in India following the new changes, the source said. Foreign cloud companies using Indian data centres were already promised a tax exemption until 2047, and the new amendment removes the need for government approval. The proposed Bill also allows Indian data centres to be run on a leased basis rather than only under direct ownership. The government is also looking to boost manufacturing in India and has proposed additional 10 years of tax breaks for foreign companies providing capital goods and machinery to contract manufacturers and warehouses in the electronics sector till March 2041. This move is seen as benefiting Big Tech companies, including Apple and Google, looking to increase manufacturing in India. “Global companies bring in equipment, components and materials to have goods made in India. These measures give them the long-term certainty they need to commit,” the source said. The Bill provides a tax holiday until March 2041 on the sale of rough diamonds for foreign diamond mining companies and related entities. “The aim is to shift a meaningful share of the global rough diamond trade to India and to build a financing ecosystem around it,” the source said. The government has also proposed to provide tax exemption for unit holders of real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) on dividends received, even if the special purpose vehicle (SPV) has opted for the new tax regime. To stem the revenue loss from this change, the Bill proposes raising the surcharge on SPVs opting for the new tax regime to 25% from 10%. “This protects small investors and gives a further push to investment in real estate and infrastructure,” the source said.