UPSC Prelims Practice Questions — Govt. introduces Bill to ‘make it easier to do business in India’
Q1. With reference to how the Taxation and Other Laws (Amendment) Bill, 2026 alters the tax treatment that existed before it, consider the following statements:
1. The exemption available to foreign companies supplying capital goods to Indian electronic contract manufacturers was earlier to end with tax year 2030-31, and the Bill extends it by another ten tax years.
2. Foreign companies storing electronic components in Customs-bonded warehouses were earlier covered by a safe harbour with a presumptive tax of 2 per cent, in place of which the Bill proposes a fifteen-year exemption.
3. For special purpose vehicles opting for the new tax regime, the Bill lowers the surcharge to 10 per cent, bringing them on par with other domestic companies.
Which of the statements given above is/are correct?
- The exemption available to foreign companies supplying capital goods to Indian electronic contract manufacturers was earlier to end with tax year 2030-31, and the Bill extends it by another ten tax years.
- Foreign companies storing electronic components in Customs-bonded warehouses were earlier covered by a safe harbour with a presumptive tax of 2 per cent, in place of which the Bill proposes a fifteen-year exemption.
- For special purpose vehicles opting for the new tax regime, the Bill lowers the surcharge to 10 per cent, bringing them on par with other domestic companies.
- A. 1 and 3 only
- B. 1 and 2 only
- C. 2 and 3 only
- D. 1, 2 and 3
Q2. Consider the following as beneficiary categories under the Taxation and Other Laws (Amendment) Bill, 2026:
1. Foreign mining companies, sightholders and brokers dealing in rough diamonds in notified special zones at Mumbai and Surat, who get a fifteen-year exemption.
2. Foreign cloud-service companies procuring services from specified data centres in India, whose exemption runs up to the year 2047.
3. Unit holders of Real Estate Investment Trusts and Infrastructure Investment Trusts, whose dividend exemption is restored even where the underlying special purpose vehicle opts for the new tax regime.
4. Eligible offshore investment funds, for whom the relaxed fund-manager conditions are confined to funds set up within an International Financial Services Centre.
Which of the above is/are correctly identified?
- Foreign mining companies, sightholders and brokers dealing in rough diamonds in notified special zones at Mumbai and Surat, who get a fifteen-year exemption.
- Foreign cloud-service companies procuring services from specified data centres in India, whose exemption runs up to the year 2047.
- Unit holders of Real Estate Investment Trusts and Infrastructure Investment Trusts, whose dividend exemption is restored even where the underlying special purpose vehicle opts for the new tax regime.
- Eligible offshore investment funds, for whom the relaxed fund-manager conditions are confined to funds set up within an International Financial Services Centre.
- A. 1 and 2 only
- B. 2, 3 and 4
- C. 1, 2 and 3 only
- D. 1, 3 and 4
Q3. The Taxation and Other Laws (Amendment) Bill, 2026 was brought before Parliament to regularise which one of the following instruments already in force?
- A. The Taxation Laws (Amendment) Ordinance, 2025, promulgated in June 2025
- B. The Finance (No. 2) Ordinance, 2026, promulgated in March 2026
- C. The Income-tax (Amendment) Ordinance, 2026, promulgated in June 2026
- D. The Payment and Settlement Systems (Amendment) Ordinance, 2025, promulgated in June 2025
Q4. Under the amendment proposed by the Bill, the authority to specify the electronic payment modes on which banks and payment system providers may not levy any charge would vest in which one of the following?
- A. The Reserve Bank of India, acting through regulations under the Payment and Settlement Systems Act, 2007
- B. The Central Government, acting by notification under the Payment and Settlement Systems Act, 2007
- C. The Central Board of Direct Taxes, acting through circulars issued under the Income-tax Act, 2025
- D. The National Payments Corporation of India, acting through directions issued under the Finance Act, 2026
Q5. With respect to the conditions an eligible investment fund must satisfy so that its fund manager's activity in India does not constitute a business connection, the Bill proposes that the number of such conditions be:
- A. reduced from 13 to 3, and only for funds set up exclusively within an International Financial Services Centre
- B. reduced from 15 to 5, and only for funds set up exclusively within an International Financial Services Centre
- C. reduced from 11 to 7, for funds located anywhere in India, including an International Financial Services Centre
- D. reduced from 13 to 5, for funds located anywhere in India, including an International Financial Services Centre
Q6. The longest horizon of tax certainty created by the Bill — running up to the year 2047 — is extended to which one of the following?
- A. Foreign companies supplying capital goods to Indian electronic contract manufacturers
- B. Foreign companies storing electronic components in Customs-bonded warehouses in India
- C. Foreign cloud-service companies procuring services from specified data centres in India
- D. Foreign mining companies and sightholders trading rough diamonds in notified zones
Q7. The proposed change to the Payment and Settlement Systems Act, 2007 is discussed as potentially opening the way to a 'merchant discount rate' on certain UPI transactions. In payments terminology, the merchant discount rate is:
- A. the price reduction a merchant offers a customer as an inducement to pay digitally instead of in cash
- B. the fee borne by a merchant for accepting a digital payment, shared among the entities that process the transaction
- C. the fee charged by the acquiring bank on the issuing bank towards settlement of interbank obligations
- D. the concessional rate at which the central bank settles the net obligations of payment system operators