India Passes Tax Exemption Law for Overseas Rough Sellers

Overview

India's parliament has passed a new law that grants a 15-year income tax exemption to foreign companies selling rough diamonds in special notified zones (SNZs), a move that could reshape the global rough diamond trading landscape. The exemption applies to sales within secure zones in Mumbai and Surat, with the policy expected to support their growth as globally recognized rough diamond trading centres.

Tax Exemption Details

The Taxation and Other Laws (Amendment) Bill, 2026, exempts foreign companies from income tax on rough diamond sales in these zones from October 1 this year until March 2041, according to reporting by India Today. The exemption applies to a range of overseas-based rough sellers, including miners, brokers, and aggregators, as well as operators of tenders and auctions, and sightholders – a term for De Beers' contract customers, as reported by Rapaport. Under the new law, proceeds from rough sales will not count toward total income for a tax year used to calculate a company's tax obligation. As a condition, the company must carry out the sale in one of the SNZs, such as those inside Mumbai's Bharat Diamond Bourse (BDB) and the Surat Diamond Bourse (SDB), and must submit certain information when asked.

Industry Response

Gem and Jewellery Export Promotion Council (GJEPC) chairman Kirit Bhansali called the legislation "a defining moment for India's diamond industry." "For years, the one thing holding us back from becoming a global rough-diamond trading hub was not capability or capacity – it was certainty," he said. "We cut and polish 14 out of every 15 diamonds in the world. With this law, the entire diamond value chain – from rough trading to manufacturing, polishing and jewelry exports – can now be anchored in India."

Anoop Mehta, convenor on the Diamond Panel at GJEPC, emphasized the benefit for small and medium enterprises. "This will give Indian manufacturers – particularly small and medium enterprises — direct access to high-quality rough without the cost and complexity of sourcing overseas," he said. The policy is expected to boost exports, investments, and jobs in the sector, according to India Today.

Why India Struggled as a Trading Hub

The new law addresses a long-standing obstacle. Previously, special notified zones allowed foreign miners to show stones in India, but taxes consuming a third of profits, making it unviable. In 2024, a fix let foreign miners declare a flat 4 per cent profit on such sales, but it was only for mining companies, not brokers and auction houses, as reported by India Today. The new law covers those entities, potentially opening the market.

The global trading landscape has been dominated by Antwerp, which has four centuries of infrastructure and a low tax rate, and Dubai, which offers zero tax and foreign ownership. India was the world's largest rough diamond importer in 2025, importing 106.09 million carats worth $11.07 billion. Yet, the trading of rough stones often bypassed India due to the tax burden.

The Namibia Connection

A senior government delegation from Namibia visited Mumbai a week after the legislation was passed to explore direct rough diamond trade. Namibia produced 2.09 million carats worth $721.4 million in 2025, with an average value of $343.88 per carat, according to Kimberley Process data. India is currently exploring a memorandum of understanding with Namibia, as reported by Rapaport.

Persistent Challenges

Despite the optimism, India Today highlights that a tax law is not a trading floor. Several hurdles noted in the report:

• GJEPC has asked the government to update trade and customs rules so that middlemen are allowed inside the zones.
• The tax department has yet to issue the paperwork rules.
• The zones are built assuming the buyer is Indian, meaning India is a cheaper shop, not yet a marketplace where foreigners trade with each other.
• Surat lacks direct flights to Mumbai, let alone to Tel Aviv or Brussels.
• The Surat Diamond Bourse's 4,200 offices are struggling to attract traders and polishers.

Outlook

The policy is widely seen as a step forward. As Bhanshi said, certainty is what was missing. The 15-year exemption provides that statutory certainty. Whether it will overcome infrastructure and procedural hurdles remains to be seen, but the direction is toward anchoring 's entire diamond industry in India.