OPINION | Union Budget 2026 could be a defining moment for India’s GCC ecosystem

India is the largest GCC hub worldwide.

As India readies for Union Budget 2026, multinational corporations operating global capability centres (GCCs) in the country are anticipating pivotal policy announcements.

Over the past decade, India’s GCC landscape has transformed from a BPO cost-arbitrage play into a strategic hub for knowledge services, digital engineering, analytics, R&D, shared services, and global decision-making. With nearly 2,000 GCCs employing around two million professionals, India is the largest GCC hub worldwide. In recent years, the pace of new GCC launches and the expansion of existing centres have picked up significantly. In addition, GCC-allied ecosystems such as data centres are witnessing exponential growth. The maturity of GCCs in India is also increasingly evident from the fact that Indian senior leaders are gaining a seat at the table through global and regional leadership roles.

This evolution and growth have created heightened expectations for reform, as industry anticipates pragmatic simplification, tax certainty, and capability-focused incentives to sustain momentum and global leadership.

Risks and headwinds

Despite this optimism and positive development, GCC leaders in India are bracing for challenges. Geopolitical tensions and rising anti-outsourcing sentiment have increased scrutiny of cross-border service delivery. Restrictive visa regimes have complicated talent deployment. Recent tariff-related developments have added uncertainty, prompting India to recalibrate its trade strategy. Meanwhile, countries such as Poland, the Philippines, Malaysia, and Vietnam are aggressively attracting GCC investments through tax holidays, R&D credits, and advanced infrastructure, intensifying global competition.

For example, in 2025, the Philippines extended its Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, offering income-tax holidays and enhanced deductions for foreign investors setting up IT-BPM and R&D centres in special economic zones. Similarly, Malaysia launched its Digital Investment Office (DIO), streamlining approvals and offering targeted incentives for digital infrastructure, including data centres and AI labs, to position itself as a regional digital hub.

Budget 2026 as a catalyst for support and growth

Industry expects clear and stable tax policies, in addition to a robust dispute-resolution mechanism. Streamlined regulations, simplified compliances, and targeted incentives are also anticipated to boost competitiveness and innovation. Harmonisation of state-level policies and incentives is expected to attract strategic investments more uniformly across India. In this regard, some specific anticipated Budget proposals include:

* Rationalised and clear permanent establishment (PE) norms: This proposal tops the agenda given its interplay with transfer pricing and the attribution risk of global profits to activities in India. With visa restrictions abounding, many headquarters employees are stranded in India. Headquarters are accommodating them by allowing remote work and are also keen to allow employees to operate from their GCCs in India. However, the lack of a clear tax policy in this regard exposes headquarters to service PE risk in India.

* Employee taxation of stranded employees: Linked to the above, there is an expectation of relief or rationalisation of the additional tax burden on employees who are stranded in India and exposed to Indian taxation in addition to taxation in their home employment countries.

* Facilitation of global and regional leadership roles: With many capable leaders in India, the time is ripe for them to support global and regional functions. However, explicitly enabling such roles exposes GCC headquarters to the risk of additional transfer pricing mark-ups. There is an expectation that necessary changes will be introduced to provide relief and support the aspirations of Indian leaders.

* Expansion of safe harbour provisions for transfer pricing: To strengthen India’s appeal for GCCs, there is an expectation of a sector-specific safe harbour regime with higher transaction thresholds and industry-based margins, especially for capital-intensive areas such as data centres and digital engineering. Additional measures could include aligning mark-ups with global standards, allowing multi-year coverage, and expediting advance pricing agreements for evolving business models, thereby providing tax certainty, simplifying compliance, and attracting strategic investments.

Tier-3 Cities: Unlocking Inclusive Growth

To accelerate decentralisation and inclusive growth, Budget 2026 (or subsequent policy measures) could catalyse GCC expansion into tier-3 cities by prioritising robust digital and physical infrastructure, harmonised policy frameworks, and targeted talent development. Actionable measures could include industry–academia partnerships to deliver advanced technical and multilingual training (including through AI), incentives for regional hiring, and a national digital apprenticeship scheme to foster practical skills with an emphasis on innovation. Over time, these lower-cost cities could emerge as powerhouses, competing with emerging global GCC destinations while also decongesting tier-1 cities.

Conclusion: A Runway for Global Leadership

The GCC sector deserves a sustainable runway for growth, especially against the backdrop of its historically strong contributions, the gathering clouds in the global narrative, and intensifying international competition. A Budget that addresses these expectations will signal India’s readiness to move from the back office to the boardroom of the global economy, propelling the country’s GCC ecosystem confidently into the next era of global leadership.

- With contribution from Manu Aggarwal, Price Waterhouse & Co LLP.

(Pratik Jain is Partner at Price Waterhouse & Co LLP and Vikram Doshi is Partner and Leader GCC Tax, PwC India.)

Views are personal, and do not represent the stand of this publication.