India’s lower house has approved a comprehensive tax amendment bill, hinting at new charges on high-value digital payments and measures to boost foreign investment and manufacturing, marking a significant shift in policy direction.
India’s lower house has passed a wide-ranging tax amendment bill that could reshape digital payments, fund management and manufacturing policy, even as one of its most closely watched effects remains prospective rather than immediate. According to the proposal, the government would gain legal backing to change the current zero-fee framework for some Unified Payments Interface and RuPay transactions, opening the door to charges on selected merchant payments while leaving the final list of exempt transactions to future notification.
The move comes amid an active debate over whether the government should reintroduce a merchant discount rate, or MDR, on higher-value UPI payments. LiveMint has reported that officials are considering a fee for large merchants, while Moneycontrol said the proposed charge could be below 0.5% and limited to transactions above ₹2,000. Neither account suggests a final decision has been made, but both indicate that any change would be aimed at preserving the economics of the UPI ecosystem rather than levying charges on everyday users.
Beyond payments, the legislation is designed to make India more attractive to global capital. The bill would simplify tax conditions for foreign fund managers, making it easier for some to relocate operations to India without creating an adverse tax burden on their overseas income. Deloitte India partner Rajesh Gandhi said the changes could encourage private equity firms, master-feeder funds and offshore vehicles with relatively small India exposure to move management activity onshore, while Nangia Global partner Abheet Sachdeva said the reforms should improve the appeal of India’s fund-management ecosystem.
The bill also extends tax incentives linked to electronics manufacturing and data infrastructure. It would prolong an exemption for foreign companies supplying machinery and tools to Indian factories making electronics on their behalf until 2040-41, and widen support for component supply chains by fully exempting, for 15 years, income from foreign companies supplying parts stored in customs-bonded warehouses to local contract manufacturers. In a separate change, it would simplify rules for data centres by removing layers of approval and allowing Indian facilities to be leased, not only directly owned, a shift officials hope will support larger cloud and artificial intelligence infrastructure investments.
Other provisions are aimed at boosting investment in real estate, infrastructure and diamond trading. The bill would keep dividends from real estate and infrastructure investment trusts tax-free for investors even if the operating company moves to the newer tax regime, while also encouraging foreign diamond miners and related traders to sell rough diamonds in special zones in Mumbai and Surat. It also replaces a June 5 ordinance that granted income-tax relief on interest and capital gains from government securities for foreign portfolio investors, underlining the government’s broader effort to make India’s tax system more predictable for overseas money.
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