GCC industry cheers Budget 2026, says it ends the challenging transfer pricing uncertainty

GCC

• Budget 2026 expands safe harbour for GCCs, raising threshold to Rs 2,000 crore
• Uniform 15.5% margin and automated approvals offer tax certainty for five years
• IT service consolidation and faster APA timelines ease MNC compliance.

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The Union Budget 2026 has addressed some long-pending asks from the global capability centres (GCCs), combining tax certainty with incentives for artificial intelligence and digital infrastructure.

Finance minister Nirmala Sitharaman, on February 1, proposed expansion of the safe harbour framework, raising the threshold from Rs 300 crore to Rs 2,000 crore and lowering the applicable margin to a uniform 15.5 percent, replacing the earlier range of 17 to 24 percent that varied by service line.

The move is aimed at reducing long-standing transfer pricing uncertainty that has constrained planning and scale for large GCCs.

GCCs are offshore captive units set up by multinational corporations (MNCs) to handle IT, research & development (R&D), and other strategic business functions, rather than just acting as back-office support. As of late 2025 and early 2026, India hosts over 1,800 to 1,900 GCC units, employing over 2.1 million professionals.

“Budget 2026 takes a practical, system-level approach to strengthening India’s role as a global base for Global Capability Centres. The expansion of safe harbour provisions, with more realistic margins and multi-year certainty, directly addresses one of the most persistent challenges GCCs face in India: transfer pricing uncertainty that limits long-term planning and scale,” said Pari Natarajan, CEO, Zinnov.

Additionally, software development services, IT-enabled services, knowledge process outsourcing and contract R&D have been clubbed under a single “Information Technology Services” category. The finance minister also said approvals under the safe harbour regime will now be automated and rules-driven, removing the need for tax officer scrutiny.

Once opted for, the margin can be continued for five years, offering multi-year predictability on tax outcomes.

“This clarity (15.5 percent safe harbour framework) can be an actual game changer, unlocking private investment and accelerating the build out of cloud and data infrastructure critical for AI workloads,” said Pratap Daruka, CFO, Tredence.

Easing Predictability, Compliance for GCCs

For GCC leaders and headquarters teams, this predictability is not merely a compliance issue as it plays a central role in decisions on whether higher-value mandates in areas such as artificial intelligence (AI), engineering and core business functions can be anchored in India over the long term.

Industry executives said the changes materially improve ease of operations and reduce audit exposure and dispute risk.

“This Budget sends a very strong and timely signal to global enterprises that India is not just a delivery destination, but a long-term strategic base for technology-led operations,” according to Srinivasan Sarvabhouman, CFO, ANSR.

The consolidation of services and uniform margin simplify transfer pricing outcomes, while faster unilateral advance pricing agreement (APA) timelines further reduce friction for multinational enterprises scaling India centres.

"The Budget creates an environment where GCCs can move beyond cost efficiency to becoming true engines of enterprise innovation," Natarajan added.

Fast-tracking of APA Norms

The government has also proposed accelerating the unilateral Advance Pricing Agreement (APA) process, aiming to conclude it within two years, with an option to extend the timeframe 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.

Reacting to the development, Gaurav Vasu, Co-founder & CEO of market intelligence firm UnearthIQ, said APA becomes a more usable route for complex GCC models. "Fast-tracked unilateral APAs (target about 2 years and extendable) and extension of modified return benefits to associated entities help groups achieve tighter alignment across multi-entity structures," Vasu added.