The Taxation and Other Laws (Amendment) Act, 2026: fund managers can finally come home.

Parliament's monsoon-session tax Act cuts the offshore fund-manager conditions from thirteen to five and exempts FII income on government securities — a quiet but consequential reset for India's fund-management industry.

Parliament passed the Taxation and Other Laws (Amendment) Act, 2026 in the first half of August — introduced in the Lok Sabha on 4 August, cleared by both Houses within the week, and since given Presidential assent, as reported. It replaces the Income-tax (Amendment) Ordinance promulgated on 5 June 2026, and folds in a cluster of measures on fund management, government-securities investment, electronics manufacturing, diamond trading and digital payments. Most of the headlines went to the UPI provision. The provision that matters most to this site's readers is quieter: India has finally made it practical for the people who manage offshore capital to live and work here.

The fund-manager reset

For a decade, the safe-harbour regime for offshore funds with India-based managers came with a list of conditions — thirteen of them, as reported — covering investor diversification, arm's-length remuneration and fund size, among others. Miss one, and the offshore fund risked a business connection in India, dragging the fund itself into the Indian tax net because its manager sat in Mumbai or Bengaluru rather than Singapore or Dubai. In practice, almost nobody qualified, so the management layer stayed offshore even when the founders, the analysts and the deals were all Indian.

The 2026 Act cuts those conditions from thirteen to five, as reported, with effect from 1 April 2026. The stated intent is direct: an eligible fund manager should be able to relocate to India without the offshore fund being treated as having a business connection here. Paired with the existing incentives for fund structures in GIFT City IFSC, the direction of policy is unmistakable — India wants the fund-management industry onshore, not just the portfolio companies.

The government-securities exemption

The Act also exempts foreign institutional investors and the Bank for International Settlements from income tax on interest earned on Indian government securities, and on capital gains from their sale, exchange or transfer. Following India's inclusion in global bond indices, this removes a friction that made G-sec allocations less attractive to foreign portfolios than the index weights implied.

The UPI footnote

The Act amends the framework governing electronic payments in a way that could, in future, permit charges on UPI transactions. The Finance Minister stated in Parliament that the amendment should not be read as imposing any charge and that UPI remains free for consumers. Worth watching; not worth panicking over.

What to do with this

If you manage — or plan to raise — an offshore fund and have been running the management company from Singapore or Dubai mainly for tax reasons, the calculus has changed. The questions now are practical: whether your structure meets the five conditions, whether a GIFT City vehicle or an onshore manager serves you better, and how a relocation interacts with your own residency under the RNOR rules if you move with the fund. Our guide to GIFT City IFSC covers the adjacent regime, and the Cross-Border Tax practice handles the treaty and FEMA layer underneath.

How Advisory Monks Consulting helps

Advisory Monks Consulting advises fund managers, VCs and their portfolio founders on cross-border structure — eligibility under the revised fund-manager regime, GIFT City versus onshore management vehicles, the FEMA and transfer-pricing consequences of relocating a management company, and the personal residency planning that comes with moving home. Speak with a partner if the new regime changes your plans.

This note is general information based on the Taxation and Other Laws (Amendment) Act, 2026 as reported at the time of writing, not legal or tax advice. Figures and condition counts are as reported; confirm the enacted text and notified rules for your specific facts before acting.

This note is general guidance, not tax or legal advice. Positions depend on your specific facts — speak with a partner before acting.