Overview
On 17 August 2026, President Droupadi Murmu gave her assent to two important statutes: the Taxation and Other Laws (Amendment) Act, 2026 and an amendment to the Payment and Settlement Systems Act, 2007. Both bills had been passed by Parliament on 10 August 2026. The changes aim to boost foreign investment, strengthen domestic electronics production and give the government flexibility to modify the zero‑MDR regime for digital payments.
Key Developments
- The taxation amendment provides process certainty for foreign cloud providers to use Indian data centres and extends income‑tax exemptions for foreign firms that contract Indian manufacturers of electronics until FY 2040‑41.
- The payment‑systems amendment legally empowers the government to alter the Merchant Discount Rate (MDR) framework for UPI and NPCI‑run services.
- Future MDR charges, if any, will be decided by the UPI and Services Steering Committee and will apply only to selected merchant categories, keeping consumer‑level UPI transactions free.
- The amendment replaces a June‑5 ordinance that exempted interest and capital‑gain income of FPIs from tax on G‑Sec holdings.
Important Facts
- Tax exemption for foreign firms using Indian contract manufacturers covers mobile phones, laptops, PCs, tablets, servers and related components.
- Foreign companies storing components in customs warehouses for onward supply to Indian manufacturers receive a 15‑year inc