The government has introduced the Taxation and Other Laws (Amendment) Bill, 2026, aimed at attracting global capital. The proposal changes how REITs and InvITs are taxed, simplifies expansion rules for data centers, and eases requirements for foreign investment funds. These shifts are expected to impact valuations and operational flexibility for companies in these sectors.
The Indian government introduced the Taxation and Other Laws (Amendment) Bill, 2026, in the Lok Sabha on August 4, 2026. This comprehensive set of proposals aims to make India a more attractive destination for global investors by simplifying tax rules and providing more certainty for long-term projects. The bill covers a range of areas, with specific updates that could influence the financial health and growth plans of companies in the real estate, digital infrastructure, and fund management sectors.
Impact on REITs and InvITs
One of the most watched parts of the bill concerns Business Trusts, specifically Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). These trusts own properties or infrastructure projects through underlying companies, often called Special Purpose Vehicles (SPVs). Previously, there was uncertainty regarding the tax treatment of dividends passed from these underlying companies to the trust and then to the unit holders. The new bill proposes to restore dividend tax exemptions for the unit holders.
To balance this, the proposal suggests a 15% surcharge increase at the level of the underlying SPV if that company chooses the new corporate tax regime. For investors, this effectively shifts the tax burden from the individual unit holder to the underlying company. This move is designed to make these trusts more attractive to retail and institutional investors, as it simplifies the income structure, though investors should monitor whether this results in lower distributable cash from the underlying companies.
Shifts in Data Center Regulation
Recognizing the growing need for digital infrastructure, the bill introduces a major change for the data center industry. Currently, companies often face a rigid, approval-based process to qualify for certain tax exemptions. The proposed bill aims to move this to a condition-based system. By removing the need for case-specific government approvals and instead setting clear conditions that companies must meet, the government intends to speed up the expansion of data centers and cloud service operations in India. This could lower the administrative hurdles for tech-focused infrastructure companies and make it easier to plan long-term projects without the risk of delayed approvals.
Support for Investment Funds and Manufacturing
For foreign investment funds, the bill simplifies the rules for fund managers who wish to operate from India without creating complex tax issues. By reducing the number of conditions required for safe harbor protection—rules that prevent the fund from being taxed as an Indian business entity—the government hopes to encourage more global fund managers to set up offices in India. Additionally, the bill extends tax incentives for foreign companies that supply capital equipment to Indian electronics manufacturers until March 31, 2041. This long-term extension provides a stable horizon for companies involved in the electronics supply chain.
What Investors Should Monitor
While these changes are designed to encourage growth, investors should remember that the effectiveness of these measures depends on implementation. The shift to a condition-based regime means that companies must strictly meet specific eligibility criteria to enjoy the tax benefits. The final impact on profitability will depend on how companies navigate these new compliance requirements and whether they can successfully align their business models with the conditions set by the government. Market participants will likely track the official notifications and the specific statutory conditions that will be finalized following the bill's passage.