Government to introduce Bill to bar charges on notified digital payments, will entail tax changes across key sectors

The government is slated to introduce the Taxation and Other Laws (Amendment) Bill, 2026, in the Lok Sabha on Tuesday, with the legislation proposing a series of amendments to the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025, and the Finance Act, 2026.

The government is slated to introduce the Taxation and Other Laws (Amendment) Bill, 2026, in the Lok Sabha on Tuesday, with the legislation proposing a series of amendments to the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025, and the Finance Act, 2026. The Bill will replace the Income-tax (Amendment) Ordinance, 2026. It is listed for introduction in Lok Sabha tomorrow.

The bill says that "no bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using one or more electronic modes of payment as may be notified by the Central Government". One of the key proposals in the Bill is aimed at promoting digital payments. It provides that no bank or payment system provider shall levy charges on electronic payment modes notified by the Central Government, a move aimed at encouraging wider adoption of digital transactions across the country.

The proposed legislation also contains several tax-related measures covering foreign investment, electronics manufacturing, fund management, data centres, the diamond industry and business trusts. To encourage investment in government securities, the Bill proposes tax exemption for Foreign Institutional Investors (FIIs) on interest income and capital gains arising from investments in Government Securities (G-Secs). A similar tax exemption has also been proposed for the Bank for International Settlements (BIS) on its investments in government securities.

The Bill also seeks to simplify the tax framework for Eligible Investment Funds and Fund Managers, with the objective of boosting fund management activity and providing greater tax certainty in India. In a major push for the electronics manufacturing sector, the government has proposed extending the tax exemption for contract manufacturing until FY2040-41.

The Bill also proposes classifying mobile phones, laptops, tablets, servers, wearables and related components as "Specified Electronic Goods." In addition, foreign companies storing electronic components in customs bonded warehouses are proposed to receive tax relief until FY2040-41. The proposed legislation also includes measures for the digital infrastructure sector. It seeks to relax tax rules for leased data centres operated by Indian companies, providing relief to the sector.

For the diamond industry, the Bill proposes extending the tax exemption on rough diamond sales until March 31, 2041, for foreign mining companies, sightholders, brokers and auction or tender companies. The Bill also proposes relief in tax exemption conditions for dividends received by unit holders of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) through business trusts.

On corporate taxation, the government has proposed increasing the surcharge from 10 per cent to 25 per cent for Special Purpose Vehicles (SPVs) opting for the new tax regime, while retaining the surcharge at 10 per cent for other domestic companies. (ANI)