The proposals presented in Budget 2026-27 outline a carefully structured, long-term strategy aimed at reinforcing India’s major economic priorities on the road to Viksit Bharat 2047. At a time of global market volatility and shifting supply chains, the Budget places a strong emphasis on predictability, strategic capacity building and sustained competitiveness rather than short-term tax concessions.
A central theme of the Budget is tax certainty, particularly for global businesses evaluating India as a manufacturing and services hub. India is currently the world’s seventh-largest services exporter, accounting for 4.3 per cent of global trade, and continues to attract the highest levels of foreign investment in this sector.
With the government targeting a rise in India’s share of global services exports to 10 per cent by 2047, Global Capability Centres, or GCCs, are positioned as a key growth driver. However, prolonged tax disputes over profit margins and advance pricing agreements have often dampened investor confidence.
Improving Ease of Doing Business for GCCs
To address this, Budget 2026-27 introduces a uniform safe harbour margin of 15.5 per cent for IT and allied services from 1 April 2026. This replaces the earlier fragmented structure ranging between 17 per cent and 24 per cent across multiple categories. The turnover eligibility threshold has also been raised sharply to ₹2,000 crore from ₹300 crore.
In addition, unilateral advance pricing agreements for IT service companies will be fast-tracked, with a target completion timeline of two years, extendable by six months. This is significant given that nearly 40 per cent of all unilateral APAs signed in FY 2024–25 belonged to this sector. Collectively, these steps are expected to substantially ease operational and compliance challenges for GCCs in India.
Strong Push for Data Centres and Digital Infrastructure
Another major focus area is the data centre ecosystem. With investments of around $70 billion already underway and an additional $90 billion announced, the Budget provides a 20-year tax holiday for foreign companies offering cloud services through Indian data centres.
Clarity on permanent establishment risks and profit attribution has become a decisive factor for multinational firms planning core digital infrastructure. The introduction of a cost-plus-15 per cent safe harbour is likely to benefit certain Indian data centre service providers. Along with existing policy incentives, these measures enhance India’s credibility as a global destination for digital infrastructure expansion.
Extended Tax Holiday for GIFT IFSC
Reinforcing India’s ambition to develop a globally competitive financial hub, the Budget proposes extending the tax holiday for entities in GIFT IFSC from 10 years to 20 years. This move provides long-term certainty to investors and enhances the international appeal of the financial zone.
The Budget also clarifies that income earned outside the tax holiday period will be taxed at a concessional rate of 15 per cent, creating a predictable and transparent tax regime across the investment lifecycle.
Recalibration of Buyback Tax Rules
The Budget marks a significant reset in buyback taxation by restoring capital gains-based taxation for shareholders while imposing higher rates on promoters. Promoters, defined under Sebi regulations for listed companies and aligned with the Companies Act for others, will face a tax rate of 22 per cent for promoter companies and 30 per cent for individual promoters.
Retail and public shareholders will return to a regime that factors in acquisition cost and holding period, with long-term capital gains taxed at 12.5 per cent and short-term gains at 20 per cent. While not a full return to the pre-2013 framework, the revised structure balances revenue considerations with predictability for investors.
Targeted Support for Manufacturing and Energy Security
Manufacturing receives focused support, particularly in toll manufacturing. The Budget proposes a five-year tax exemption for foreign companies supplying capital goods or tools to units located in customs-bonded areas, subject to specified conditions.
In the energy sector, the extension of zero basic customs duty on imports for nuclear power projects until 2035 is expected to reduce project costs and support long-term energy security and decarbonisation objectives.
The proposal to develop dedicated rare-earth corridors further underscores the government’s strategic industrial vision. Supported by customs duty exemptions on capital goods, the initiative aims to build an integrated mining-to-manufacturing ecosystem, strengthening domestic supply chains in a geopolitically sensitive sector.
Viewed holistically, Budget 2026-27 reflects a deliberate, multi-year policy framework designed to strengthen India’s strategic economic bets and support sustained growth on the path to Viksit Bharat 2047.
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