Taxation and Other Laws (Amendment) Act, 2026

1. Offshore Investment Funds - From Broad Tests to Defined Conditions

The proposed amendments seek to liberalise the conditions applicable to eligible investment funds under the Income-tax Act.

The earlier framework contained several detailed conditions relating to participation, investment concentration and other eligibility requirements. The proposed changes seek to simplify or modify these conditions with the stated objective of making India more attractive for global fund management.

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Litigation perspective

A framework based on more objectively stated statutory conditions may reduce disputes arising from broad or subjective assessments of the manner in which an offshore fund is structured or operated.

But litigation does not necessarily disappear.

The focus may shift towards questions such as:

• whether the prescribed statutory conditions have actually been satisfied;
• the manner in which participation or investment is computed;
• interpretation of defined expressions;
• treatment of associated entities; and
• whether the factual structure of a fund falls within the statutory safe harbour.

The likely consequence is not the disappearance of litigation, but a possible movement from broad "substance" disputes towards disputes over the precise application of statutory conditions.

2. Digital Payments and MDR - Statutory Framework Rather Than a Blanket Position

The Act also proposes amendments concerning charges relating to specified digital payment transactions.

This is important from a legal perspective because the question is no longer merely whether a particular charge is commercially or administratively desirable. The legislation seeks to provide a statutory framework within which the Government may prescribe the applicable position.

Litigation perspective

The distinction between:

a statutory power to regulate or prescribe charges

and

the actual exercise of that power through a notification or subordinate legislation

will remain important.

Consequently, future disputes may concern:

• the scope of the delegated power;
• the validity of notifications issued under it;
• classification of transactions;
• differential treatment of categories of transactions; and
• the extent to which the delegated legislation remains within the authority conferred by Parliament.

Thus, legislative authorisation does not necessarily eliminate constitutional or administrative-law questions. It may instead move the litigation to the next stage of the statutory framework.

3. Electronics Manufacturing - Classification May Become the Litigation Frontier

The proposed amendments provide significant tax incentives for specified electronics manufacturing activities, including an extended period of tax benefit for qualifying activities.

The practical importance of such incentives will depend substantially upon the statutory definitions and eligibility conditions.

Litigation perspective

Where a tax incentive depends upon whether a particular product, component, machinery or activity falls within a defined statutory category, disputes may arise at the boundary.

Questions of classification can become particularly significant where:

• imported components are used;
• a product contains multiple categories of parts;
• manufacturing and assembly activities overlap; or
• the taxpayer's activity does not fit neatly within the statutory description.

The litigation may therefore move away from the broad question "Is the taxpayer eligible for the incentive?" to the narrower but decisive question:

"Does the particular activity or component satisfy the precise statutory definition?"

4. The Transitional Question - Ordinance to Legislation

Perhaps the most immediate litigation issue is transitional.

The Act seeks to replace the Income-tax (Amendment) Ordinance, 2026. The existence of an Ordinance followed by legislation raises familiar but important questions concerning the legal effect of actions taken during the intervening period and the manner in which the enacted provisions operate in relation to those actions.

The precise commencement, saving and validating provisions therefore require careful examination.

For practitioners, the chronology should be mapped:

Ordinance -> actions/notices/orders -> Act -> enacted legislation -> commencement/saving provisions

The mere replacement of an Ordinance by an Act does not, by itself, answer every question concerning acts already undertaken under the Ordinance.

5. The Broader Litigation Lesson

Tax legislation often seeks to reduce litigation by replacing uncertainty with clearer statutory boundaries.

That objective is understandable.

But from a litigation perspective, clarity in the statute does not necessarily mean the end of litigation.

It may instead change the character of the dispute:

From interpretation of broad principles -> to application of precise statutory conditions.

The next generation of disputes may therefore concentrate on:

definitions • classification • eligibility conditions • delegated legislation • commencement • saving provisions • transitional rights

For practitioners, this makes the transitional and definitional provisions of the amendment as important as the headline tax concessions themselves.