💥Join UPSC 2027,2028 Mentorship (August Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

Type: Bills/Act/Laws

  • Supreme Court to examine whether DPDP Act is crippling RTI

    Why in the News

    The Supreme Court has agreed to examine whether the Digital Personal Data Protection Act, 2023 is being used to defeat the Right to Information Act, 2005. The conflict is between the right to informational privacy and the right of citizens to access public information.

    What is Section 44(3) of the DPDP Act, 2023?

    1. Amending provision: Section 44(3) amended Section 8(1)(j) of the RTI Act, which governs exemption of personal information.
    2. Effect: It removed the earlier public interest override, allowing any personal information to be withheld.

    Why does this threaten the Right to Information?

    1. Blanket exemption: Officials can now deny information by labelling it ‘personal data’ without a public interest test.
    2. Journalism risk: Investigative reporting that relies on named records could be gagged.
    3. Accountability loss: Asset disclosures and beneficiary lists that expose wrongdoing may fall outside access.

    What is the case for the privacy safeguard?

    1. Fundamental right: Privacy was recognised as a fundamental right under Article 21 in the K.S. Puttaswamy judgment.
    2. Data misuse: Uncontrolled disclosure of personal data can enable profiling and harm.

    What must be resolved for the two laws to coexist?

    1. Public interest test: A restored balancing standard is the missing precondition for reconciling access and privacy.

    Conclusion

    The central question is whether privacy protection can be read so widely that it nullifies transparency. The next milestone is the Court’s substantive hearing on the challenge to Section 44(3).

    Back2Basics: Right to Information Act, 2005

    1. Objective: Empowers citizens to seek information from public authorities to promote transparency and accountability.
    2. Key body: Central and State Information Commissions adjudicate appeals and complaints.
    3. Section 8: Lists exemptions from disclosure, including the personal information clause now amended.

    “[2020, GS2, 10 marks] ‘Recent amendments to the Right to Information Act will have profound impact on the autonomy and independence of the Information Commission’. Discuss.”

  • FCRA Amendment Bill becomes a Monsoon Session flashpoint

    Why in the News

    The Foreign Contribution (Regulation) Amendment Bill, 2026 has become a flashpoint of the Monsoon Session, with the Opposition demanding it be scrapped or sent to a Joint Committee of Parliament (JPC). The contest is between the state’s interest in policing foreign funds and the operating space of civil society and minority run institutions.

    What is the Foreign Contribution (Regulation) Act (FCRA), 2010?

    1. Governing law: The FCRA regulates the receipt and use of foreign contributions by individuals, associations, and NGOs in India.
    2. Enforcing authority: The Ministry of Home Affairs grants, renews, suspends, and cancels FCRA registration.

    What does the Amendment change?

    1. Asset vesting: On cancellation of registration, an entity’s assets could vest in a government designated authority.
    2. Fund routing: Proceeds from such assets could flow to the Consolidated Fund of India.

    Why is the Opposition resisting the Bill?

    1. Procedural demand: The INDIA bloc seeks a JPC review before passage, alleging inadequate scrutiny.
    2. Minority institutions: Christian charitable bodies, major service providers in tribal areas, have sought legal clarity on the ‘religion neutral’ framing.
    3. Chilling effect: Wider cancellation and vesting powers could deter legitimate foreign funded welfare work.

    What is the counter case for tighter FCRA control?

    1. Sovereignty concern: Foreign funds can be used to influence domestic policy and public order.
    2. Accountability: Stricter vesting rules aim to prevent misuse of assets built with foreign money.

    Conclusion

    The Bill tests the balance between regulating foreign money and protecting civil society autonomy. Its trajectory now depends on whether it is referred to a JPC or pushed through in the current session.

    Back2Basics: Consolidated Fund of India

    1. Constitutional basis: Established under Article 266(1) of the Constitution.
    2. Composition: Holds all revenues received, loans raised, and receipts from loan recovery by the Union government.
    3. Withdrawal rule: No money can be withdrawn from it except by law passed by Parliament.

    “[2015, GS2, 12.5 marks] Examine critically the recent changes in the rules governing foreign funding of NGOs under the Foreign Contribution (Regulation) Act (FCRA), 1976.”

  • Taxation and Other Laws (Amendment) Bill and the UPI levy

    Why in the News

    The Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026 on 6 August 2026. The Bill gives legal backing to modify the zero charge regime on some digital payments. Analysis links the move to United States trade pressure over digital payment barriers.

    What is the zero Merchant Discount Rate regime on UPI and RuPay?

    1. Merchant Discount Rate (MDR): the fee a merchant pays to banks and card networks for processing a digital payment.
    2. Zero MDR rule: since 2020 India has barred any charge on Unified Payments Interface (UPI) and RuPay debit card transactions.
    3. Effect on users: UPI stays free at the point of payment, which drove mass adoption.
    4. Bill change: the amendment removes the link between the Payment and Settlement Systems Act, 2007 and the Income Tax Act, and lets the government modify the zero charge regime.
    5. Scope: any charge would apply to merchants, not end users, and the steering committee headed by the National Payments Corporation of India (NPCI) is yet to decide.

    What else does the Bill do?

    1. Manufacturing: it aims to promote domestic electronics manufacturing.
    2. Foreign capital: it replaces a June ordinance that exempted interest income and capital gains earned by Foreign Portfolio Investors from government securities.

    Why is the change linked to United States trade demands?

    1. Section 301 lever: the United States Trade Representative (USTR) runs a Section 301 investigation, a tool to act against foreign trade barriers.
    2. Barrier tag: in March 2026 USTR classified India’s digital payment policies as favouring domestic players.
    3. Lost business: Visa and Mastercard cite lost potential business as Indian consumers shifted to free UPI.
    4. Market cap concern: USTR flagged that two United States owned providers processed over 80 percent of UPI transactions, alongside the 30 percent cap on third party apps.
    5. Precedent: India earlier scrapped the 6 percent equalisation levy on digital services under similar pressure.

    What are the concerns around the levy?

    1. Adoption risk: charges could slow UPI use if passed to merchants and then to prices.
    2. Policy autonomy: critics read the change as a concession under trade negotiation rather than domestic reform.
    3. Revenue pool: an interoperable zero cost platform limits card network fee income, which the change could restore.

    [2026] Which one of the following best describes the key objective of India’s ‘Open Network for Digital Commerce’ (ONDC) initiative?
    (a) To allow digital government control over all digital commerce transactions
    (b) To replace private e-commerce players
    (c) To break the dominance of large e-commerce platforms by enabling interoperability across networks
    (d) To mandate UPI-based payments for all online transactions

  • Government and faculty spar over the Indian Statistical Institute Bill, 2026

    Why in the News

    The Indian Statistical Institute (ISI) Bill, 2026 seeks to restructure the governance of the Indian Statistical Institute by converting it from a registered society into a government controlled statutory body corporate. The proposal has sparked concerns over institutional autonomy.

    What is the Indian Statistical Institute (ISI)?

    • Founded: Established in 1931 by Prasanta Chandra (P.C.) Mahalanobis.
    • Premier institution: A leading centre for statistics, mathematics, data science, computer science, quantitative economics and related research.
    • Institution of National Importance: Declared under the Indian Statistical Institute Act, 1959.
    • Administrative Ministry: Ministry of Statistics and Programme Implementation (MoSPI).
    • Current governance: Functions as a registered society managed by a representative Governing Council.

    What does the Bill propose?

    • Repeals the 1959 Act: Introduces the Indian Statistical Institute Bill, 2026.
    • Body corporate: Converts ISI from a society into a statutory body corporate with perpetual succession.
    • New governance structure: Replaces the Governing Council with an 11 member Board of Governors.
    • Greater government role: The Board will have a majority of government nominated members, increasing the Centre’s role in administration.

    Why are faculty members concerned?

    • Reduced academic autonomy: Faculty argue that greater government control may affect academic freedom and institutional independence.
    • Lack of consultation: They claim the Bill was drafted without adequate consultation with ISI’s academic community.
    • Demand for scrutiny: Opposition members have sought referral of the Bill to the Standing Committee on Finance for detailed examination.

    Prelims Pointers

    • Indian Statistical Institute (ISI) was founded in 1931 by P.C. Mahalanobis.
    • P.C. Mahalanobis developed the Mahalanobis Distance and played a key role in India’s statistical system and economic planning.
    • ISI is an Institution of National Importance under the Ministry of Statistics and Programme Implementation (MoSPI).
    • The Indian Statistical Institute Bill, 2026 proposes replacing the Governing Council with an 11 member Board of Governors.

    [2023] Consider the following organizations/bodies in India:
    1. The National Commission for Backward Classes
    2. The National Human Commission Rights
    3. The National Law Commission
    4. The National Consumer Disputes Redressal Commission
    How many of the above are constitutional bodies?

    [A] Only one

    [B] Only two

    [C] Only three

    [D] All four

  • Rajya Sabha passes the Supreme Court (Number of Judges) Amendment Bill, 2026 as a Money Bill

    Why in the News

    Parliament passed the Supreme Court (Number of Judges) Amendment Bill, 2026, increasing the sanctioned strength of the Supreme Court through the Money Bill route, triggering debate over the constitutional validity of bypassing the Rajya Sabha.

    What is a Money Bill?

    • Constitutional basis: Defined under Article 110 of the Constitution.
    • Scope: A Bill is a Money Bill only if it deals exclusively with matters such as:
      • Taxation, Government borrowing, Custody or withdrawal of money from the Consolidated Fund of India, Contingency Fun, and Appropriation of public money
    • Speaker’s certification: The Speaker of the Lok Sabha decides whether a Bill is a Money Bill, and the certification is endorsed on the Bill.
    • Limited role of Rajya Sabha: The Rajya Sabha can only recommend amendments within 14 days, which the Lok Sabha may accept or reject.

    What does the Bill provide?

    • Higher judicial strength: Increases the sanctioned strength of the Supreme Court from 34 to 38 judges, including the Chief Justice of India (CJI).
    • Replaces an Ordinance: Substitutes the Ordinance promulgated in May 2026.
    • Government’s objective: Reduce case pendency, improve judicial efficiency, and strengthen access to justice.

    Why is the Money Bill route controversial?

    • Constitutional issue pending: The validity of certifying certain laws as Money Bills is under consideration by a larger Constitution Bench of the Supreme Court.
    • Concern over precedent: In the Aadhaar judgment (2018), the dissenting opinion described the use of the Money Bill route for substantive legislation as a “fraud on the Constitution.”
    • Reduced parliamentary scrutiny: Since the Rajya Sabha has only an advisory role, critics argue that the route weakens bicameral legislative oversight.

    “[2014] The power to increase the number of judges in the Supreme Court of India is vested in?
    (a) The President of India.
    (b) The Parliament.
    (c) The Chief Justice of India.
    (d) The Law Commission.

  • FCRA Amendment Bill, 2026 and powers to take over foreign funded assets

    Why in the News

    FCRA Amendment Bill, 2026 will amend the foreign funding law would let a designated authority take over the assets of organisations that lose their registration. The tension is between the state’s control over foreign money and the autonomy of civil society and religious bodies.

    What is the Foreign Contribution (Regulation) Act, 2010?

    1. Governing law: The Foreign Contribution (Regulation) Act, 2010 (FCRA) regulates the acceptance and use of foreign donations by individuals and organisations.
    2. Registration: Bodies receiving foreign funds must register and route money through a designated bank account.
    3. Home Ministry: The Union Home Ministry administers registration, renewal, and cancellation.

    Key Rules and Goals

    1. Main Goal: Stop foreign money from harming the country, public order, or politics.
    2. Who Cannot Get Funds: Politicians, judges, government workers, and news media cannot accept foreign money.
    3. Bank Routing: Groups must use a single, approved bank account to get these funds.

    What does the amendment propose?

    1. Cessation clause: A new provision defines cessation of an FCRA certificate on cancellation or lapse. A certificate stops working if an organization fails to apply for renewal, gets denied, or lets the 5-year validity expire. The Bill proposes to increase oversight into processes relating to the handling of assets upon cancellation, surrender, or cessation of a certificate of registration, the management of defunct organisations, and other administrative and compliance processes.
    2. Asset vesting: On cessation, foreign contributions and assets vest in a government appointed Designated Authority, with proceeds going to the government.
    3. Retrospective reach: A clause would apply the vesting to assets already acquired.

    Why is the Bill contested?

    1. Sweeping powers: Critics argue it lets the executive seize and sell the assets of non governmental organisations.
    2. Faith bodies: Christian and other religious institutions fear disproportionate impact.
    3. Constitutional concerns: Objections cite Articles 14, 25, 26 and 300A on equality, religious freedom, and property.

    What are the challenges to the FCRA framework?

    1. Funding squeeze: Foreign contribution inflows have already fallen sharply after earlier tightening. Amnesty International India had to freeze operations in 2020 after the government froze its bank accounts over FCRA compliance disputes.
    2. Compliance burden: Small organisations struggle with reporting and renewal requirements.
    3. Chilling effect: Advocacy and rights groups face uncertainty over registration.
    4. Discretion risk: Wide discretion in cancellation invites arbitrariness.
    5. Judicial overhang: Asset vesting is likely to face challenge in the courts.

    Conclusion

    The Bill shifts the balance from regulating foreign money toward controlling the organisations that receive it. The next milestone is whether the government refers it to a Select Committee before passage.

    Back2Basics

    The Foreign Contribution (Regulation) Amendment Bill, 2026:

    It was introduced in the Lok Sabha on March 25, 2026 and it establishes a framework for managing and disposing of assets and unutilised foreign contributions of organizations that lose their FCRA certification.

    Key Provisions of the Bill

    1. Designated Authority: Creates an official body to supervise, manage, and temporarily or permanently vest assets created using foreign funds if an organization’s certificate is cancelled, surrendered, or expires.
    2. Places of Worship: Requires the authority to preserve the religious character of any asset that functions as a place of worship.
    3. Rationalized Penalties: Reduces maximum imprisonment terms for minor or technical violations of the Act from five years down to one year.
    4. Investigation Coordination: Mandates that state-level agencies secure central government approval prior to launching independent FCRA-related investigations.

    PYQ Relevance

    [UPSC 2025] Civil Society Organizations are often perceived as being anti-State actors rather than non-State actors. Do you agree? Justify.

    Linkage: The PYQ examines the relationship between the State and civil society organisations, and the balance between regulation and autonomy. The article highlights how the proposed FCRA amendments expand state control over NGOs. This raises concerns about civil society autonomy and constitutional freedoms.

  • What is the Public Examinations (Prevention of Unfair Means) Amendment Bill

    Why in the News?

    Repeated crises in NEET 2024, UGC NET 2024 and NEET 2026 have exposed a gap in how examination breaches are defined and prevented. Despite the Public Examinations (Prevention of Unfair Means) Act, 2024, closure reports found no prosecutable conventional paper leak, raising the deeper question of institutional accountability.

    What is the Public Examinations (Prevention of Unfair Means) Act, 2024?

    1. Anti cheating law: It criminalises organised cheating, paper leaks and impersonation in public examinations conducted by central agencies.
    2. Penalties: It prescribes stringent imprisonment and fines and targets service providers and organised gangs, not candidates alone.

    What counts as a paper leak?

    1. Traditional meaning: A paper leak is the unauthorised disclosure of a printed question paper before the exam, during printing, storage or transport.
    2. Broader compromise: Confidential material can leak at question setting, moderation, translation or digitisation, disclosing selected questions without any printed paper being recovered.

    Why do repeated crises yield no prosecutable evidence?

    1. Investigation focus: Probes trace physical papers, so a compromise at the source may never produce recoverable evidence of a conventional leak.
    2. Closure reports: The Central Bureau of Investigation (CBI) filed closure reports in the 2024 cases, reportedly finding no prosecutable leak under the Bharatiya Nyaya Sanhita (BNS), 2023 or this Act.
    3. Detection failure: In NEET 2026, official action followed a whistleblower’s complaint rather than the exam’s own security or intelligence systems.

    Where does primary accountability lie?

    1. Examination authority: Prevention rests with the examination body, here the National Testing Agency (NTA), not with the CBI, police or courts that act only after a crisis.
    2. Lifecycle safeguards: Accountability must run from selection of question setters and translators to centres, digital systems, evaluation and result processing.

    What is the proposed way forward?

    1. White Paper: A committee headed by the former Unique Identification Authority of India (UIDAI) chairman is to document the full spectrum of breaches across the three examinations.
    2. Integrity framework: This should underpin a Public Examination Integrity Framework (PEIF) prescribing standardised end to end standard operating procedures, conflict of interest management and cybersecurity audits.

    What are the challenges to examination integrity?

    1. Insider access: A small number of individuals with privileged access at setting and moderation are the hardest risk to police.
    2. Coaching ecosystems: Organised coaching networks create demand and channels for leaked or guided material.
    3. Cybersecurity: Digitised question banks and candidate data widen the attack surface beyond physical papers.
    4. Scale: Examinations covering millions of candidates across thousands of centres magnify any single point of failure.
    5. Attribution and prosecution: Source compromises leave little physical evidence, making conviction under penal law difficult.
    6. Conflict of interest: Repeated engagement of the same experts and vendors without rotation weakens independent oversight.

    Conclusion

    The central issue is not the absence of a law but the failure to detect and prevent breaches early. Public confidence will be restored by an examination system with lifecycle safeguards and clear institutional accountability, not by harsher penalties or more logistics after the fact.

    Back2Basics:

    Public Examinations (Prevention of Unfair Means) Act, 2024

    1. Central legislation to prevent unfair means in public examinations conducted by bodies like the NTA, UPSC, SSC, railways and banking recruitment.
    2. Defines offences including paper leaks, impersonation and tampering with computer systems.
    3. Provides for imprisonment of three to ten years and fines up to one crore rupees for organised crimes.
    4. Makes offences cognisable, non bailable and non compoundable.

    Defined Unfair Means

    1. Unauthorized access to or leakage of question papers or answer keys.
    2. Assisting candidates physically or via communication devices inside exam halls.
    3. Tampering with computer networks, hardware, or customized software resources.
    4. Creation of fake examination authorities or issuance of bogus admit cards to cheat

    PYQ Relevance

    [UPSC 2024] What are the aims and objects of the recently passed and enforced, The Public Examination (Prevention of Unfair Means) Act, 2024? Whether University/State Education Board examinations, too, are covered under the Act?

    Linkage: The question tests the objectives, scope and limitations of the Public Examinations (Prevention of Unfair Means) Act, 2024. The article evaluates the Act’s implementation, showing that institutional safeguards and accountability remain as important as legal penalties in ensuring examination integrity.

  • Rajya Sabha clears the Registration of Births and Deaths (Amendment) Bill, 2026

    Why in the News

    The Rajya Sabha passed the Registration of Births and Deaths (Amendment) Bill, 2026, after the Lok Sabha cleared it earlier. The amendment requires an order from a Judicial Magistrate First Class for any birth or death registered more than two years after the event, tightening the civil registration system toward universal registration.

    What is the Registration of Births and Deaths Act, 1969?

    1. Legal basis: The Registration of Births and Deaths Act, 1969 makes recording of every birth and death compulsory and lays down the machinery of registrars for the Civil Registration System.
    2. Vital statistics: Registration data feeds official birth and death rates and underpins the issue of legal identity documents.

    What does the amendment change?

    1. Stricter delayed registration: It amends sub section (3) of Section 13 so that registrations delayed beyond two years need an order from a Judicial Magistrate First Class.
    2. Existing tier retained: Delays of up to two years will continue to require an order from a district, sub divisional or authorised executive magistrate.

    Why tighten delayed registration?

    1. Curbing misuse: The government stated that late registration beyond two years was being misused to create fraudulent records.
    2. Guarding the rolls: Ministers argued the change stops fictitious entries from becoming voters and prevents registration of persons born elsewhere.
    3. Universal registration: The stated aim is that every child born is registered and every death recorded, encouraging timely reporting.

    What concerns were raised?

    1. Overburdened magistrates: Members warned that judicial magistrates are already overburdened, so the requirement could delay genuine registrations.
    2. Uneven capacity: The number of judicial magistrates varies sharply across states, creating disparity in access.
    3. Ease of registration: Some urged easier registration through camps and door to door drives and removal of penalties rather than added judicial steps.

    What are the challenges to universal civil registration?

    1. Rural and remote reach: Home births and deaths in remote areas often go unreported because families lack awareness of the reporting window.
    2. Migrant populations: Mobile and migrant families struggle to register events at their place of residence, producing gaps and duplicate records.
    3. Institutional coordination: Registration depends on hospitals, panchayats and municipal registrars whose reporting discipline varies widely.
    4. Cause of death recording: Medical certification of cause of death remains weak outside large hospitals, limiting the quality of vital statistics.
    5. Added judicial load: Routing older registrations through magistrates can create backlogs where courts are already understaffed.

    Conclusion

    The amendment tightens the civil registration system by making very late registration a judicial act rather than an administrative one. It now proceeds to receive the President’s assent, after which state rules and registrar capacity will determine whether it improves accuracy without excluding the genuinely late.

    Back2Basics:

    Registration of Births and Deaths Act, 1969

    1. Central legislation administered through the Registrar General of India and state Chief Registrars.
    2. Makes registration of births, deaths and stillbirths compulsory across the country.
    3. Provides for the Civil Registration System that generates continuous vital statistics.
    4. Amended in 2023 to enable a national database and use of birth certificates as a single document for various services.

    The Registrar General and Census Commissioner of India (RGI)

    1. It is the top government authority under the Ministry of Home Affairs responsible for conducting the country’s decennial Census, managing demographic surveys, and overseeing civil registration.

    Key Functions and Responsibilities

    1. Census Operations: Plans, conducts, and analyzes India’s large-scale population censuses.
    2. Civil Registration: Implements the Registration of Births and Deaths Act (1969), maintaining national vital statistics via the Civil Registration System.
    3. Linguistic & Demographic Surveys: Conducts linguistic surveys and tracks socio-economic and population indicators

    What are the benefits of registration of birth and death?
    The birth certificate is the first right of the child and it is the first
    step towards establishing its identity. The following compulsory
    uses     of birth and death certificates are emerged:

    1. For admission to schools
    2. As proof of age for employment.
    3. For proof of age at marriage.
    4. To establish parentage.
    5. To establish age for purpose of enrollment in Electoral
      Rolls.
    6. To establish age for insurance purposes.
    7. For registering in National Population Register (NPR).
    8. Production of Production of death certificate for the purpose of inheritance of property and for claiming dues from insurance companies and other companies.

  • Taxation and Other Laws (Amendment) Bill, 2026 introduced in Lok Sabha

    Why in the News?

    The Finance Minister introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha to amend tax and payment laws, improve tax certainty, attract foreign investment, and support the Make in India initiative.

    Key Highlights

    • Amends the Payment and Settlement Systems Act, 2007, Income-tax Act, 2025, and Finance Act, 2026.
    • Replaces the Income-tax (Amendment) Ordinance, 2026 with a permanent law.
    • Simplifies tax exemptions for foreign companies using Indian data centres.
    • Allows leased data centres to avail tax benefits.
    • Facilitates relocation of foreign fund managers to India without creating a taxable business presence.
    • Restores dividend tax exemption for REITs and InvITs under the new tax regime.

    Other Legislative Business

    • Discussion on Demands for Excess Grants (FY 2022-23).
    • Introduction of the Appropriation (No. 3) Bill, 2026 to regularise excess government expenditure.
    • Statements on implementation of Parliamentary Standing Committee recommendations.
    • Consideration of the Bankers’ Books Evidence Bill, 2026 to modernise evidence laws for digital banking.

    Appropriation Bill

    • Authorises the government to withdraw money from the Consolidated Fund of India to meet approved expenditure.
    • Required under Article 114 of the Constitution.

    Demands for Excess Grants

    • Presented when actual government expenditure exceeds the amount approved by Parliament.
    • Examined by the Public Accounts Committee (PAC) before parliamentary approval.
    • Constitutional Basis: Article 115.

    Bankers’ Books Evidence Bill, 2026

    • Seeks to modernise legal provisions governing bank records by recognizing digital banking and electronic records.

  • Govt plans tax relief for offshore funds, electronics’ contract manufacturing

    Why in the News?

    The government has circulated the Taxation and Other Laws (Amendment) Bill, 2026, which relaxes the conditions under which offshore funds managed from India can claim tax exemption. The Bill also extends a tax exemption for foreign firms supplying equipment to electronics contract manufacturers and introduces a fresh tax holiday for rough-diamond trading in a notified zone. The measures respond to foreign outflows and to lobbying by manufacturers seeking tax certainty.

    What is the Taxation and Other Laws (Amendment) Bill 2026?

    1. Purpose: The Bill amends the Income-tax Act to promote fund management activity and provide tax certainty to specified foreign and offshore entities. It bundles relief for offshore funds, electronics contract manufacturing and rough-diamond trading.
    2. Replaces an Ordinance: The Bill replaces the Income-tax (Amendment) Ordinance, 2026 promulgated on 5 June, which had exempted foreign portfolio investors from capital gains and withholding taxes on government securities. The Ordinance was brought amid pressure on the rupee and foreign outflows.

    What is an Eligible Investment Fund (offshore fund)?

    1. Definition: An Eligible Investment Fund is an offshore pooled investment vehicle that can be managed by a fund manager based in India without the fund itself being treated as having a taxable business presence in India.
    2. Why the safe harbour matters: Without the exemption, the manager’s activity in India could create a business connection, exposing the fund’s global income to Indian tax at rates of up to 38%.

    Key Rules for an Eligible Investment Fund

    1. Outside Location: The fund must be created, registered, or incorporated outside the host country (for example, outside India).
    2. Non-Resident Status: The fund and its general members must live or reside outside the target country.
    3. Member Limits: It usually needs a minimum number of members (such as 25 non-connected investors) so that it is a true public or pooled vehicle and not controlled by a single family or small group.
    4. Diverse Ownership: No single member or direct group can hold a massive stake (usually restricted below 10% or 20% depending on precise tax codes) to prevent individual dominance

    How does the Bill ease conditions for offshore funds?

    1. Fewer conditions to qualify: The government proposes to remove 8 of the 13 conditions that offshore funds must meet so their activity does not constitute business income in India. Only five conditions would remain.
    2. Dropped thresholds: Removed conditions include a minimum of 25 investors, a maximum 10% interest for a single investor, a cap on investing more than 25% of the corpus in one entity, and a minimum monthly average corpus of Rs 100 crore.
    3. Remaining conditions: The fund must not be a resident of India and must not control or manage any business in India. Direct investment by Indian residents must not exceed 5% of the corpus on 1 April and 1 October of the tax year.
    4. Intended effect: Aligning safe-harbour rules with global fund structures aims to relocate offshore fund management activity to India and to unify the framework with the International Financial Services Centre (IFSC).

    What relief goes to electronics contract manufacturing?

    1. Extended exemption to FY41: Tax exemption for a foreign company that provides capital goods, equipment or tooling to a contract manufacturer of electronics in India is extended to tax year 2040-41, from the earlier 2030-31. The exemption was first introduced earlier in the year, valid only to 2031.
    2. Why it was sought: A major device maker lobbied for the change, fearing that ownership of high-end machinery supplied to contract manufacturers would be treated as a business connection and expose its profits to Indian tax, unlike in China.
    3. Scope of devices: The exemption applies to makers of mobile phones, tablets, laptops, hearing and wearable electronic devices. India is set to make 26% of the world’s iPhones in 2026, up from 6% four years earlier.
    4. Storage of components: Foreign firms’ income from storing and providing parts to contract manufacturers is exempt until 2041, applying to factories and warehouses in customs-bonded areas treated as outside the customs border.

    What is the rough-diamond tax holiday?

    1. Fifteen-year holiday: A new tax holiday of 15 years up to 31 March 2041 is proposed for specified foreign companies acting as mining companies, sightholders, brokers, aggregators and tender or auction entities. It exempts their income from the sale of rough diamonds in a notified special zone in India.
    2. Objective: The measure aims to bring rough-diamond trading, currently routed through overseas centres, into a notified Indian zone.

    What are the challenges to the tax-relief package?

    1. Revenue foregone: Long-dated exemptions to 2041 lock in a loss of tax revenue over more than a decade, with benefits concentrated among large foreign firms.
    2. Selective advantage: Relief tailored to a single dominant electronics buyer raises questions of a level playing field for smaller manufacturers.
    3. Uncertain relocation gains: Easing offshore-fund conditions may not by itself pull managers to India if enforcement and dispute practices remain aggressive.
    4. Base-erosion concern: Broad exemptions on cross-border income invite scrutiny over profit shifting through bonded zones and notified special zones.

    Conclusion

    The Bill uses targeted, long-dated tax exemptions to keep foreign capital and electronics manufacturing anchored in India while replacing a June Ordinance on government-securities taxation. Its success depends on whether removing safe-harbour conditions genuinely relocates fund management to India and whether the electronics concessions deepen domestic value addition rather than mere assembly. The Bill is expected to be introduced in Parliament during the week.

    Back2Basics

    1. Eligible Investment Fund: An offshore fund permitted to be managed from India without creating a taxable business connection, subject to safe-harbour conditions under the Income-tax Act.
    2. Foreign Portfolio Investor (FPI): An overseas investor registered with the Securities and Exchange Board of India to invest in Indian securities.
    3. International Financial Services Centre (IFSC): A jurisdiction, such as GIFT City in Gujarat, that provides financial services to non-residents in foreign currency under a distinct regulatory regime.
    4. Contract manufacturing: Production by a third-party manufacturer of goods for a brand owner, common in electronics assembly.
    5. Customs-bonded area: A warehouse or factory treated as outside India’s customs border, where import duty is deferred until goods enter the domestic market.

    PYQ Relevance

    [UPSC 2019] Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly?

    (a) Certificate of Deposit (b) Commercial Paper (c) Promissory Note (d) Participatory Note

    Answer: (d)