Nasscom has welcomed the recently tabled Taxation and Other Laws (Amendment) Bill, 2026. The Bill seeks to replace the Income-tax (Amendment) Ordinance promulgated earlier in June 2026, bringing significant changes including the blanket ban on UPI merchant charges to offering aggressive, long-term tax incentives for the electronics manufacturing sector and tax relaxation for data centres.
On Tuesday, the Union government tabled the Taxation and Other Laws (Amendment) Bill, 2026, during the monsoon session Parliament, marking a major reset for the country’s digital payments and corporate tax frameworks.
According to Nasscom, the Income Tax Bill simplifies the tax exemption framework by removing the approval process. It said the move improves tax certainty for foreign companies, eases compliance requirements for cloud service providers, and lowers the approval burden on Indian data centres. Nasscom further said that the regime should remain condition-based rather than approval-based, adding that the changes will make Indian data centres more attractive for global investment.
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Key features of the bill
The Bill scraps the “zero-merchant discount rate (MDR)” provision, under which, banks and payment system providers were strictly barred from levying a fee on transactions routed through UPI and RuPay debit cards.
Instead of a universal ban on fees, the Centre will hold the power to notify specific electronic payment modes that remain eligible for zero-MDR. This amendment grants the government the flexibility to selectively reintroduce MDR on certain digital transactions, aiming to create a sustainable funding and revenue model for the payment infrastructure ecosystem.
The tax benefit framework has been expanded to include leased data centres operated by Indian companies, simplifying the tax rules for foreign entities procuring their services.
Bill introduces deep, long-term tax relief for the electronics supply chain as foreign suppliers providing capital goods to domestic electronics contract manufacturers will see their tax holiday extended all the way to financial year 2040-41 (FY’41).
The government has retained dividend tax exemption for unit holders of business trusts-such as Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs)-under specified conditions.
Under the new corporate tax regime, the surcharge for Special Purpose Vehicles (SPVs) has been fixed at a higher rate of 25%. Meanwhile, other standard domestic companies will continue to operate at the standard 10% surcharge.
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