CBDT FAQs on the Taxation and Other Laws (Amendment) Bill, 2026: electronics contract-manufacturing exemption to 2040-41, data centre conditions eased, new exemptions for rough diamonds
CBDT’s FAQs explain six proposals of the Taxation and Other Laws (Amendment) Bill, 2026 on the Income-tax Act, 2025: a ten-year extension of the exemption for foreign companies supplying capital goods to electronics contract manufacturers, easier data centre conditions, two new exemptions, dividend relief for unit holders of business trusts and five conditions instead of thirteen for offshore funds.
Key facts
- In force
- Proposals of the Bill, as explained in CBDT’s FAQs
- Who it affects
- Foreign companies supplying electronics contract manufacturers, data centre operators and cloud providers, rough diamond sellers, REITs/InvITs and their unit holders, offshore funds and fund managers
- What it is
- Clarified
- Section
- Income Tax
- Published
- 4 August 2026
In 30 seconds
- Exemption at Sl. No. 13A of Schedule IV (capital goods, equipment or tooling given to a contract manufacturer) proposed to run up to tax year 2040-41 instead of 2030-31; “specified electronic goods” defined.
- Data centre exemption at Sl. No. 13C: notification of the foreign company and of the data centre dropped; leased data centres allowed.
- New Sl. No. 13F: income of foreign mining companies and connected entities from sale of rough diamonds in a special notified zone, up to the tax year ending 31 March 2041.
- New Sl. No. 13G: income of a foreign company from components stored in a custom bonded warehouse for a contract manufacturer, up to the tax year ending 31 March 2041.
- Unit holders of business trusts to get dividend exemption even where the SPV is in the new tax regime; an additional surcharge of 15% proposed on such SPVs.
- Conditions for an eligible investment fund in Schedule I proposed to be cut from 13 to 5.
हिंदी में सार
CBDT ने Taxation and Other Laws (Amendment) Bill, 2026 पर FAQs जारी किए हैं। इलेक्ट्रॉनिक्स के contract manufacturer को मशीनरी और टूलिंग देने वाली विदेशी कंपनी की छूट tax year 2040-41 तक बढ़ाने, डेटा सेंटर की छूट में अधिसूचना की शर्त हटाने और लीज़ मॉडल की अनुमति देने का प्रस्ताव है। कच्चे हीरों की बिक्री और bonded warehouse में रखे components पर दो नई छूटें, business trust के unit holder को डिविडेंड छूट, और eligible investment fund की शर्तें 13 से घटाकर 5 करना भी इसमें शामिल है।
What the document is
CBDT has published a set of FAQs on the Taxation and Other Laws (Amendment) Bill, 2026. They explain, under six heads, what the Bill proposes to change in the Income-tax Act, 2025 and why.
| Subject | Provision | What the Bill proposes |
|---|---|---|
| Capital goods, equipment or tooling provided by a foreign company to a contract manufacturer | Schedule IV, Sl. No. 13A | Exemption extended by 10 years, up to tax year 2040-41; “specified electronic goods” defined |
| Foreign company procuring data centre services from a specified data centre | Schedule IV, Sl. No. 13C | Notification conditions omitted; lease model allowed; data centre to meet prescribed conditions |
| Foreign mining company selling rough diamonds | Schedule IV, new Sl. No. 13F | New exemption up to the tax year ending 31 March 2041 |
| Foreign company storing components for a contract manufacturer | Schedule IV, new Sl. No. 13G | New exemption up to the tax year ending 31 March 2041 |
| Dividend from an SPV of a business trust | Schedule V, Sl. No. 5.D, clause (b) | Clause omitted, so the unit holder’s exemption continues when the SPV is in the new regime |
| Eligible investment fund and fund manager | Schedule I | Conditions for the fund reduced from 13 to 5 |
Electronics contract manufacturing
The Finance Act, 2026 exempted, up to tax year 2030-31, a foreign company’s income from providing capital goods, equipment or tooling to a contract manufacturer — an Indian resident company in a custom bonded area that produces electronic goods for it. The Bill extends this to tax year 2040-41 and defines specified electronic goods: mobile phones; laptops, all-in-one personal computers and tablets; servers and ultra small form factor (USFF); sub-assemblies to these; and related hearables, wearables and accessories.
New Sl. No. 13G covers a foreign company that stores components in a warehouse under section 65 of the Customs Act, 1962 for supply to such a contract manufacturer. The exemption is on income from sale of the components.
Data centres
The existing exemption, available up to the tax year ending 31 March 2047, required the foreign company to be notified by the Central Government and the data centre to be notified by MeitY and owned and operated by an Indian company. The Bill drops both notifications and allows a data centre operated by an Indian company on lease.
Rough diamonds
Sl. No. 13F is for a foreign company engaged in diamond mining, or acting as a sightholder, broker, aggregator or tender and auction entity, on income from sale of rough diamonds in a special notified zone — the FAQs mention Mumbai and Surat. The diamonds must carry a Kimberley Process Certificate.
Business trusts
At present a unit holder’s dividend from a business trust is exempt only if the SPV is under the old tax regime. Because the MAT changes of the Finance Act, 2026 may move SPVs to the new regime, the Bill keeps the exemption in that case too, and proposes an additional surcharge of 15% on such an SPV to make up the revenue.
Offshore funds with a manager in India
Of the 13 conditions for an eligible investment fund, five remain: the fund is not resident in India; it is resident in a country or territory with a DTAA with India or in a notified jurisdiction; investment by Indian residents does not exceed 5% of the corpus; it does not carry on, control or manage any business in India; and no one acting for it creates a business connection in India other than through the eligible fund manager.
What readers should do
These are proposals, as explained in FAQs on a Bill. Most of the exemptions depend on furnishing information in a form to be prescribed.
Questions and answers
Till when is the exemption for foreign companies supplying capital goods to contract manufacturers available?
The Finance Act, 2026 gave it up to tax year 2030-31. The Bill proposes to extend it by another ten years, up to tax year 2040-41.
What are “specified electronic goods”?
Mobile phones; laptops, all-in-one personal computers and tablets; servers and ultra small form factor (USFF); sub-assemblies to these finished goods; and hearables, wearables and accessories related to them.
Does a data centre still need to be notified by MeitY for the foreign company’s exemption?
The Bill proposes to omit the notification condition for both the foreign company and the specified data centre, and to allow a data centre operated by an Indian company on lease. The data centre must meet such conditions as may be prescribed.
Will unit holders of a business trust lose the dividend exemption if the SPV moves to the new tax regime?
No. The Bill proposes to omit clause (b) of Sl. No. 5.D of the Table in Schedule V so that the exemption continues, and to levy an additional surcharge of 15% on the SPV in the new regime.
How many conditions must an eligible investment fund meet?
Five, under the proposed Schedule I, in place of the present thirteen.
Published 4 August 2026. Updated 6 October 2026. This report is for general information and is not professional advice. Read the source document before acting on it.