India proposes extending tax breaks for contract manufacturers to 2041

India's government has notified the Income Tax Rules, 2026, a sweeping overhaul of procedural and compliance systems under direct taxation that will take effect on September 1, according to All India Radio, the government's official broadcaster. Separately, the government on Sunday proposed easing safe harbour tax rules for offshore funds using India-based managers and extending tax breaks for foreign contract manufacturers until 2041, according to Reuters.newsonair+2

Stricter Compliance and Cross-Border Powers

The new rules implement provisions of the Income-tax Act, 2025, replacing procedural systems that had been in place for decades under the Income-tax Rules, 1962. The Ministry of Finance said the rules introduce stricter disclosures while simplifying tax procedures by reducing the total number of rules.ascent-hr+1

Under the updated framework, companies will be required to maintain share registers, hold general meetings, and pay dividends only within India, implying stronger domestic control over dividend distribution. Stock exchanges will now be required to maintain audit trails for seven years, prevent deletion of transaction records, and submit monthly reports on modified transactions.newsonair

For cross-border taxation, tax authorities can now estimate non-resident income using a percentage basis, global profit ratios, or other reasonable methods. A new zero-coupon bond framework requires applications three months before issuance, investment-grade ratings from two agencies, and defined fund usage timelines.newsonair

Offshore Fund Safe Harbour Eased

In a separate move, India proposed removing minimum fund size and investor diversification requirements under safe harbour rules for offshore funds using India-based managers, according to Reuters. Under existing rules, offshore funds must maintain a minimum corpus of 1 billion rupees, have at least 20 investors, and cap any single investor's contribution at 25 percent to avoid Indian tax exposure. Funds failing these conditions risk taxation at rates up to 38 percent.reuters

The draft bill would allow offshore funds of any size or investor concentration to appoint Indian fund managers without triggering tax liability, provided no more than 5 percent of a fund's assets come from domestic investors. The proposal requires parliamentary approval.reuters

Tax Breaks Extended for Apple and Electronics Manufacturing

India also proposed extending tax exemptions until March 31, 2041, for foreign companies providing machinery to contract manufacturers, up from the previous 2031 deadline introduced in February, Reuters reported. The extension applies to manufacturers of mobile phones, tablets, laptops, and wearable electronic devices. Apple, which had lobbied for the original tax change to avoid liability on iPhone machinery supplied to partners, stands as a primary beneficiary.wtvbam

The government has also proposed a 15-year tax exemption for foreign companies storing and providing components in customs-bonded warehouses, and extended tax breaks until 2047 for foreign companies using data center services in India.whalesbook