Budget 2026 signals India doubling down on its position as global tech services leader, IT industry says

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India is pushing to lead global technologies services ecosystem, as reflected in the government’s Budget 2026 proposals unifying IT services as a category and enhancing safe harbour thresholds.

Top executives of the sector see this as a promising move to drive long-term value amid the ongoing artificial intelligence disruption.

What’s new in Union Budget 2026?

As per the new budget, the government has proposed increasing threshold of safe harbour margins for Indian information technology services sector from Rs 300 crores to Rs 2000 crores.

Finance Minister Nirmala Sitharaman said the government will club software development services, contract R&D services, IT enabled services, knowledge process outsourcing under a single category of Information Technology (IT) Services.

The segment will now have a common safe harbour margin of 15.5 percent that will be applicable to all. This is significant reduction from the previous range of 17-24 percent margin depending on the category of services.

The government has also proposed fast tracking of unilateral Advance Pricing Agreement (APA) process for IT companies to two years that can be extended by another six months.

An APA is a tax agreement between a taxpayer and the tax authority of India, regarding the transfer pricing method for international transactions.

What did the industry say?

Rajesh Varrier, President – Global Operations & Chairman and Managing Director, Cognizant India said, “The Union Budget 2026–27 sends a clear signal that India is doubling down on its role as a global technology and services powerhouse.”

Varrier see this tax update and the move to recognise IT services as a unified category, along with enhanced safe-harbour thresholds, bringing much-needed certainty and predictability to the industry—allowing companies to shift their focus from compliance to innovation, client outcomes, and long-term value creation.

For Aparna Iyer, CFO, Wipro, the fiscal budget articulates the government’s vision to promote the Indian IT services sector as a “primary driver of India’s economic growth, leveraging Artificial Intelligence (AI) as the force multiplier.”

“The proposals such as combining IT services and R&D Services into a single bucket, increasing the threshold limit for safe harbor and providing a 2-year timeline for conclusion of unilateral APAs will provide tax certainty and reduce the cost of compliance for companies operating in the sector,” she noted.

How does these moves benefit IT business models?

Tech services industry body Nasscom highlighted that this rationalisation of international taxation and transfer pricing framework, will provide a competitiveness lever for companies.

Transfer pricing refers to setting of prices for goods, services, or intangibles exchanged between related entities like a parent company and its subsidiaries within a multinational corporation (MNC).

In the long-term with policy changes such as fast tracking of APA, and extension of safe harbour margins for a period of five years once applied, will provide business environment certainty and predictability of IT businesses.

Nasscom said that the proposal to move safe harbour approvals to an automated, rule-driven process without examination by tax officers, along with the option to apply the same safe harbour for a continuous five-year period, “represents a decisive shift away from process-heavy compliance towards clarity, predictability and trust-based governance.”

“This can significantly reduce recurring transfer pricing friction for GCCs as well as for other Indian IT and ITES providers operating eligible related-party arrangements,” the industry body said.

According to Gaurav Vasu, Founder and CEO of market intelligence firm UnearthInsight, the government has de-risked IT services taxation that will in turn protect margins, and “reinforce India’s position as a long-term global digital growth engine.”

Vasu emphasised that by scaling up safe-harbour coverage by six-fold (Rs 300 crore to Rs 2,000 crore) -- it will benefit almost all large and mid-cap IT services firms uniformly tax framework.

“Fast-tracked APAs to 2-2.5 years make precision transfer pricing commercially viable for complex, IP-intensive, and platform-led delivery models,” he explained.

Overall, the industry projected that by simplification of tax rules and expanding of safe harbour, the Union Budget backs India’s next phase of tech services growth.