Overview: The Taxation and Other Laws (Amendment) Act, 2026 delivers substantial tax concessions designed to position India as a global manufacturing hub. Key measures amend Schedule IV of the Income-tax Act, 2025, granting long-term income tax exemptions to foreign companies supplying components via custom bonded warehouses, extending tax incentives for electronics contract manufacturers up to 2041, and creating tax-free trading windows for rough diamonds in Special Notified Zones.

By introducing entries 13F and 13G into Schedule IV of the Income-tax Act, 2025, Parliament has effectively eliminated Permanent Establishment (PE) risks for foreign suppliers storing inventory inside Indian borders. This statutory shift turns India’s customs-bonded zones into frictionless operating heavens for multinational electronics brands, component manufacturers, and raw commodity traders seeking scale without local tax exposure.

Key Highlights

Extended Horizons for Electronics OEMs: Tax concessions for contract manufacturing of specified electronic goods – including mobile phones, laptops, servers, ultra-small form factor (USFF) PCs, hearables, and wearables—are extended from 2030–31 to 2040–41.

Bonded Warehouse Tax Immunity (Sl. No. 13G): Effective 1st October 2026, foreign companies storing components in custom bonded warehouses (under Section 65 of the Customs Act, 1962) to supply domestic contract manufacturers will enjoy direct income tax exemptions on sales until 31st March 2041.

Rough Diamond Trading Exemption (Sl. No. 13F): Overseas mining entities, sightholders, aggregators, and auction houses selling rough diamonds in notified Special Notified Zones (SNZs) gain complete income tax waivers up to 31st March 2041.

Data Centre Standards Clarified: Updated Note 3 strictly defines “specified data centres” as facility operations owned or leased by Indian corporate entities under prescribed regulatory guidelines.

Frequently Asked Questions

Should a foreign supplier incorporate a local entity to use custom bonded warehouse exemptions?

No. A foreign entity supplying components stored in a Section 65 customs bonded warehouse to an Indian contract manufacturer may qualify for the income-tax exemption under Sl. No. 13G without incorporating a local entity, subject to compliance with the prescribed information and filing requirements.

Which electronic products fall within the scope of “specified electronic goods”?

The specified electronic goods include mobile devices, laptops, tablets, servers, USFF units, hearables, wearables, and their corresponding sub-assemblies, as expressly listed under Note 2A.

SetIndiaBiz Support

SetIndiaBiz provides end-to-end legal and regulatory execution for international companies expanding into India:

FDI & Corporate Structuring: Wholly-owned subsidiary registration, joint venture setups, and liaison office licensing.
Customs & Factory Approvals: Setting up Section 65 In-Bond Manufacturing facilities (MOOWR scheme) and customs warehouse licensing.
Ongoing Tax Compliance: Information reporting, transfer pricing documentation, and corporate tax return filings.

These legislative updates establish unprecedented fiscal certainty for global supply chains. Structuring your Indian presence correctly ensures full commercial advantage under these expanded tax exemptions.

Author Bio

Editorial Team

Setindiabiz Editorial Team is a multidisciplinary collective of Chartered Accountants, Company Secretaries, and Advocates offering authoritative insights on India’s regulatory and business landscape. With decades of experience in compliance, taxation, and advisory, they empower entrepreneurs and enterprises to make informed decisions.

Boosting FDI in Manufacturing: New Customs and Tax Waivers for Overseas Entities (2026)