THEBUSINESSBYTES BUREAU
NEW DELHI, AUGUST 18, 2026
India’s policy landscape for foreign investment, electronics
manufacturing and digital payments received a significant boost as President
Droupadi Murmu gave her assent to two important pieces of legislation aimed at
providing greater certainty to investors, strengthening domestic manufacturing
and giving the government wider flexibility in shaping the country’s rapidly
evolving digital payments ecosystem.
President Droupadi Murmu has given her assent to the Taxation
and Other Laws (Amendment) Act, 2026, and another law to amend the Payment and
Settlement Systems Act, 2007. The two Bills were passed by Parliament on August
10.
The Taxation and Other Laws (Amendment) Act, 2026, and the
Act to further amend the Payment and Settlement Systems Act, 2007, received the
President’s assent on August 17, 2026, according to a gazette notification
issued by the Ministry of Law.
The taxation legislation is expected to strengthen India’s
appeal as an investment and manufacturing destination by attracting more
foreign capital, promoting domestic electronics production and making it easier
for foreign cloud service providers to utilise Indian data centres by offering
greater "process certainty".
The amendment to the Payment and Settlement Systems Act,
2007, meanwhile, provides a legal framework for the government to modify the
existing zero-MDR regime governing UPI and RuPay card transactions. Under the
amended framework, the government can notify which electronic payment modes or
transactions will remain exempt from merchant discount rate (MDR) charges.
At present, banks and payment-system providers cannot charge
users for payments made through UPI and RuPay debit cards.
The UPI and Services Steering Committee headed by NPCI will
now decide on the MDR charges.
While replying to the discussion on the Bill, Finance
Minister Nirmala Sitharaman had said UPI payments will remain free for
consumers, and any future merchant discount rate (MDR) will apply only to
certain categories of merchant transactions.
On the taxation front, the new law replaces the June 5
ordinance that granted income-tax exemption to interest income and capital
gains earned by foreign portfolio investors (FPIs) from investments in
government securities.
The Act also seeks to make India a more attractive base for
global fund managers by reducing the number of conditions these funds must meet
to ensure that their global income is not subjected to taxation in India.
In a major move aimed at strengthening India’s electronics
manufacturing ambitions, the legislation extends until 2040-41 the income-tax
exemption available to foreign companies that engage contract manufacturers in
India for producing electronics goods. The move is designed to provide long-term
policy certainty and encourage global players to deepen their manufacturing
presence in the country.
The specified electronic products covered under the Act include mobile phones, laptops, personal computers, tablets and servers, along with key parts and accessories.
The legislation also addresses the supply chain requirements of electronics manufacturing by proposing an income-tax exemption for 15 years, until 2040-41, for foreign companies that store components in customs warehouses for subsequent supply to contract manufacturers operating in India.
