Tax Amendment Bill 2026: Proposed Rough Diamond Tax Exemption Explained
Key Takeaways
- •The Tax Amendment Bill 2026 introduces a proposed tax exemption for foreign companies that sell rough diamonds in India.
- •Surat in Gujarat is estimated to handle approximately 90% of the world's rough diamond cutting and polishing by volume.
- •The exemption targets withholding tax obligations that foreign rough diamond suppliers may face on income deemed to accrue in India.
- •The gems and jewellery sector ranks among India's top export-earning industries, making the diamond trade significant to both employment and the export economy.
- •Further official guidance on eligibility criteria, certification requirements, effective dates, and interaction with double-taxation avoidance agreements is still pending.
Tax Amendment Bill 2026: Proposed Rough Diamond Tax Exemption Explained
The Income Tax Department has issued a clarification regarding a new tax exemption introduced under the Tax Amendment Bill 2026. The proposed exemption applies to foreign companies that sell rough diamonds in India.
According to the clarification, the measure is intended to support and strengthen India's role in the global diamond trade. India is one of the world's largest centres for diamond cutting and polishing, and the vast majority of rough diamonds imported into the country are processed by its domestic diamond industry before being re-exported. The city of Surat in Gujarat alone is estimated to handle around 90% of the world's rough diamond cutting and polishing by volume, underscoring the sector's significance to both local employment and India's export economy. The gems and jewellery sector more broadly ranks among India's top export-earning industries.
The proposed exemption takes aim at a practical supply-chain concern: foreign rough diamond suppliers that sell into India may face withholding tax obligations on income deemed to accrue in the country. Reducing or removing that tax burden could lower transaction costs for Indian processors and help keep India competitive against other emerging processing hubs. The diamond trade has also been navigating headwinds from fluctuating global demand and the growing market presence of lab-grown diamonds, adding to the pressure on Indian processors' margins.
The Tax Amendment Bill 2026 was introduced as part of broader legislative efforts to update and refine India's tax framework. The proposed rough diamond tax exemption is one of several provisions included in the bill.
Further details on the exemption's implementation, eligibility criteria, and effective dates are expected to be provided through subsequent official guidance from the Income Tax Department. Industry participants will be watching for specifics on which foreign-company transactions qualify, any certification or sourcing requirements, and how the exemption interacts with existing double-taxation avoidance agreements.
Source: CNBC-TV18
