President Droupadi Murmu has approved the Taxation and Other Laws (Amendment) Act, 2026, along with legislation updating the Payment and Settlement Systems Act of 2007. Parliament passed both measures on August 10. The laws received presidential assent on August 17, 2026, according to a Ministry of Law gazette notice. The taxation changes aim to draw additional foreign investment, support local electronics production, and simplify operations for overseas cloud providers using Indian data centers by offering greater procedural clarity. The update to the Payment and Settlement Systems Act provides statutory authority for adjustments to the zero-MDR policy on UPI and RuPay transactions. The government may now specify through notification which digital payment types or deals stay exempt from merchant discount rate fees. Currently, banks and payment operators are barred from levying charges on UPI or RuPay debit card use. The UPI and Services Steering Committee under NPCI will determine future MDR application. Finance Minister Nirmala Sitharaman stated during debate that consumer UPI transactions will stay free, with any MDR limited to select merchant categories. The taxation measure replaces a June 5 ordinance granting income tax relief on interest and capital gains earned by foreign portfolio investors from government securities. It reduces conditions for fund managers relocating to India to avoid Indian taxation on worldwide income. To promote domestic manufacturing with policy stability, the law extends until 2040-41 the tax exemption for foreign firms using Indian contract manufacturers for electronics items. Covered products include mobile phones, laptops, tablets, servers and related components. The act also offers a 15-year tax exemption until 2040-41 for foreign companies storing parts in customs warehouses for supply to Indian electronics contract manufacturers.
