India Plans Tax Reforms to Boost Foreign Investment and Manufacturing

India’s government is preparing a new package of tax reforms designed to attract foreign investment and strengthen the country’s manufacturing sector, according to a Bloomberg News report citing people familiar with the matter.

The proposed measures, which require parliamentary approval, are expected to provide greater tax certainty for international investors while supporting Prime Minister Narendra Modi’s broader strategy to position India as a leading global manufacturing hub.

Among the key proposals is the formalization of tax exemptions for overseas investors purchasing Indian government bonds. The government also plans to protect offshore investment funds from tax liabilities when their portfolios are managed by India-based fund managers, a move aimed at making India’s financial markets more attractive to global capital.

Bloomberg reported that lawmakers will also consider extending tax holidays for foreign suppliers of equipment used by domestic electronics manufacturers. The incentive, currently set to expire in 2031, would be extended until 2041. The tax benefits would apply to suppliers supporting the production of electronics such as mobile phones, laptops, tablets, and servers, reinforcing India’s push to expand local manufacturing capabilities.

In addition, Parliament is expected to review tax incentives for sectors including data centres and diamond mining, further broadening the government’s investment-friendly agenda.

The proposed reforms are part of the Modi administration’s efforts to attract multinational manufacturers, strengthen the Indian rupee, and improve the economy’s resilience following recent geopolitical tensions stemming from the U.S.-Iran conflict.

Finance Minister Nirmala Sitharaman is expected to introduce the legislation during the current parliamentary session. However, Bloomberg noted that parliamentary proceedings have faced repeated disruptions due to protests by opposition lawmakers, which could affect the timing of the bills.

If approved, the tax package would represent another significant step in India’s long-term strategy to boost foreign direct investment, expand high-tech manufacturing, and enhance its competitiveness as global companies continue to diversify their supply chains.