The Lok Sabha on Thursday passed the Taxation and Other Laws (Amendment) Bill or ToLA without debate.The Bill aims to amend the Payment and Settlement Systems Act, 2007, which could lead to imposing a Merchant Discount Rate (MDR) on the Unified Payment Interface (UPI). Apart from amendment in this act, the Bill also intends to amend the Finance Act 2026 and the Income Tax Act 2025, besides repealing an ordinance promulgated in June to provide tax exemption to foreign investors.According to Finance Ministry officials, there are three broad themes: Attracting Foreign Capital, Make in India and Ease of Doing Business. Talking about the themes of ‘Attracting Foreign Capital’ and ‘Ease of Doing Business’, an official said overseas players are often unsure whether operating in or through India will create an unexpected tax exposure. Various proposals of the Bill give clear, stable and predictable tax treatment, as well as a process to get the desired tax treatment. One such proposal is reducing the number of conditions to 5 from 13 for an Eligible Investment Fund (EIF) managed from India to avail of tax exemption on its global income.“The Bill cuts this list of conditions down sharply, keeping only what is essential to prevent misuse and round tripping of money by Indian residents. A fund manager can now relocate to India without the foreign fund being treated as doing business in India,” an official said. .The proposal for the data centre aims to bring clearer and simpler rules for data centres. Foreign cloud companies that use Indian data centres were earlier promised a tax exemption, but with the condition of clearing several layers of government notification and approval. The proposed Bill removes these approval requirements and, importantly, allows Indian data centres to be run on a leased basis, rather than only under direct ownership.Long-term certaintyOn the theme of ‘Make in India’, another official said the measures proposed in the Bill intend to give long-term certainty to global companies bringing equipment, components and materials to have goods made in India. For example, when a foreign company supplies machinery and tooling to an Indian factory that makes electronics on its behalf, its income from doing so was made tax-free. The time limit was set as five years.“Based on representations from stakeholders, it was felt that the exemption window is too short to plan large, long-term investments. The Bill extends this exemption by another 10 years, giving a much longer horizon of certainty. Now, the total exemption period is 15 years (i.e.) into FY 2040-41,” he said. The Bill also clearly defines electronic goods covered under provisions such as mobile phones, laptops, personal computers, tablets, servers and their key parts and accessories.Talking about the proposal for rough diamonds, officials explained that since 2016, foreign diamond miners have been allowed to display rough diamonds in special zones in Mumbai and Surat, without being taxed merely for showing them. Now, the Bill fully exempts the income of foreign diamond miners and traders connected with them (i.e.) sight holders, brokers, aggregators and auction houses, from selling rough diamonds in these zones, for a period of 15 years.“The aim is to shift a meaningful share of the global rough diamond trade to India and to build a financing ecosystem around it,” a second official concluded.Published on August 6, 2026