“Hon’ble FM has assured that litigation should come down and to achieve certainty and clarity, four important amendments have been introduced in this budget.

On two of them (shelf drilling and JAO-FAO), Courts have given split verdicts both in favor of the assessees and the Revenue. In one, the Court has expressed that curable procedural lapses cannot lead to incurable legal infirmities (DIN) and in Pfizer, it is clearly a debatable issue pending in the Apex Court.

What is common to all these four cases are not substantive assessments on merits giving rise to legal interpretation. These are purely threshold issues clearly trying to avoid even assessments to be made.

When Courts have expressed divergent views and matters are pending all over, the Government has taken the initiative to set the matter at rest and in line with the legislative intent."

"The Budget makes a decisive shift towards positioning India as a premier global hub for manufacturing and a high-end services provider, while deepening its integration with global value chains on the path to ‘Viksit Bharat’. It scales up strategic sectors and provides a powerful boost to data centres through a pathbreaking tax holiday for foreign cloud providers and a predictability of tax cost for IT Services providers. It also provides for a low‑litigation tax and customs systems, SEZ flexibility for DTA sales, tariff simplification, and new IT safe harbours together enhance certainty, capacity utilisation and competitiveness. These measures materially advance both ease of doing business and a Trust based overall ecosystem, thereby positioning India for a major global leap"

"This is an interesting budget for what it has done and what it has not.  It is really a ‘clean up’ budget to set the stage for more transformative budgets in the future.  A few interesting observations.  IT Sector and Electronics Manufacturing are clear beneficiaries of this Budget.  We have heard the FM on safe harbour for IT and promoting unilateral APAs.  From Electronic Manufacturing perspective, two topics that we have been representing to the Ministry have been accepted - one of them being 2% safe harbour for goods belonging to NR when stored in India and exemption to NR for supply of Capital Goods for Tolling in Bonded Zones. The industry has been seeking certainty in these areas and LKS had made representations on their behalf. Glad to see that some of the suggestions have been accepted and have seen the light of the day. The proposed changes will provide impetus to the sector. 

The ‘quieter’ aspects of a budget are rarely appreciated - reducing litigation, decriminalisation of offences, reduction in pre-deposits for stay, extensions of timelines, etc.  In my experience, these tend to have larger impact in the overall scheme of things rather than tax breaks and incentives. Overall, I think it is a good budget and something to look forward to in the future years."

This article has been co-authored by Shankey Agrawal, Partner, BMR Legal Advocates.

"The Budget’s tax proposals signal a clear attempt to rebalance India’s tax framework towards predictability and voluntary compliance, rather than incremental rate tinkering. The most striking feature of the Budget is the continued articulation of the “trust first, scrutinise later” philosophy, which has become a hallmark of this Government.

The new personal income-tax slabs and the expanded rebate under the new regime mark a decisive shift towards consumption-led growth. At the same time, these proposals are implicitly nudging taxpayers away from exemption-heavy planning. Equally important, though less headline-grabbing, is the rationalisation of TDS/TCS, including higher thresholds, fewer rates, and removal of overlapping provisions. These proposals should meaningfully reduce friction for businesses and individuals acting as withholding agents. Extending the updated return window to four years reinforces a compliance culture built on self-correction rather than enforcement.

From an international and corporate tax perspective, proposals such as multi-year arm’s length price determination, expansion of safe harbour rules, and continued incentives for IFSC units point to a strong policy objective of reducing litigation and improving certainty for cross-border investors.

Overall, the tax proposals indicate a maturing tax regime, with fewer big-ticket reforms but ongoing improvements aimed at reducing compliance costs, encouraging honest reporting, and aligning tax administration more closely with India's broader goals for investment and production."

"Budget 2026-27 aligns well with the macroeconomic backdrop of resilient growth, fiscal consolidation, and the Economic Survey’s emphasis on policy credibility and administrative discipline. With the economy expanding around its potential rate and capital expenditure sustaining demand, the tax proposals consciously prioritise certainty, facilitation, and transition management over revenue-maximising activism. 

On direct taxes, the formal commencement of the Income-tax Act, 2025 from 1 April 2026 frames the Budget as a bridge to a new legal and administrative architecture. The focus on simplified rules, redesigned forms, staggered return filing timelines, and automated lower/nil TDS certificates reinforces the Government’s intent to shift the compliance paradigm from adversarial enforcement to rule-based, technology-led facilitation. Measures such as integration of assessment and penalty orders, conversion of select penalties into fees, and graded decriminalisation of minor offences respond directly to long-standing concerns around multiplicity of proceedings, litigation intensity, and uncertainty in tax administration. These steps are consistent with the broader reform narrative of strengthening India’s investment climate by lowering the structural “tax risk premium”. 

The safe harbour expansion and fast-tracked APA regime for IT services is particularly significant in the context of India’s services-led growth and export competitiveness, providing predictability to a sector that remains a key engine of growth and high-value employment. Similarly, targeted incentives for data centres, toll manufacturing, and bonded warehousing support the manufacturing and digital infrastructure push highlighted in the speech. 

Overall, the Budget reinforces the Budget’s positioning as a transitionary, institution-building exercise—seeking to embed predictability, administrative discipline, and process reform as core enablers of sustained growth, rather than relying on headline rate changes or ad hoc tax interventions. The Government’s clear intent to decisively shed India’s historical reputation for difficult tax administration and perceived tax aggressiveness is visible in a number of the tax proposals. However, the ultimate credibility of this reform agenda will rest heavily on on-ground implementation."

Budget 2026

Budget 2026 was presented against the backdrop of a fragile global order - shaped by developments in Venezuela, Greenland, Iran and Bangladesh and a rising wave of protectionist economic policies worldwide. Against this context, the Finance - Minister delivered a Budget that reinforces the Viksit Bharat agenda through measures aimed at job creation (including services, GCCs and data centres) and balanced growth (via support for MSMEs and socio-economic scheme outlays), while keeping the fiscal deficit at a prudent 4.3%.

On the personal tax front, individual tax rates remain unchanged. Shifting the taxation of buybacks to a capital-gains framework for all shareholders—while adding an incremental levy for promoters - offers relief to minority shareholders and improves consistency in the taxation of capital distributions. Other positive steps include lower TCS rates for overseas tours, education and medical remittances under LRS, decriminalisation of certain offences, relief for small taxpayers in cases of inadvertent non-disclosure of foreign assets, a five-year global-income exemption for select non-residents, centralised submission of Forms 15G/15H via depositories, and electronic filing for lower TDS certificates. However, taxpayers will need to account for changes such as higher STT on futures and options, disallowance of interest expense set-off against dividend/Mutual Fund income, and measures that discourage secondary purchases of Sovereign Gold Bonds while planning their taxes.

On the corporate front, reduction of MAT rate from 15% to 14% and utilisation of partial MAT credit act as an incentive to move to the new tax regime. There have been positive measures such as higher threshold for safe harbour rules for IT / ITes Sector, extended tenure of tax holidays for units in IFSC to 20 years, a five year tax exemption to any foreigner providing capital goods to any toll manufacturer in a bonded warehouse and merging of ICDS with Ind AS reporting which are welcome.

The expectations around filing of consolidated ITR’s for married couples, clarity on manner of implementation of GAAR post the recent Court rulings and clarity around tax neutrality of certain restructurings didn’t find a place in Budget.

Looking ahead, the key will be navigating an evolving geopolitical landscape while sustaining domestic momentum - through stronger job creation, strategic resilience, and robust macroeconomic buffers to keep India on a sustained growth trajectory.

“ A series of High Court rulings in recent times have been invalidated. To name a few, Roca Bathrooms, Shelf Drilling, etc. all pending before the Supreme Court now stand settled retrospectively. Issues like timeliness assessments / reassessment where DRP has passed orders and transfer pricing adjustments were made due to differing interpretations on jurisdiction and timelines are now proposed to be settled retrospectively. The Union Budget 2026 Tax Proposals seek to overturn these interpretations and bring certainty by clarifying the jurisdiction to trigger reassessment, protecting assessments from lapses like incorrect or missing DIN and settling timelines under the DRP and transfer pricing regime. While the retrospective elements may be debated, the broader objective is clearly to reduce avoidable litigation driven purely by procedural ambiguity.” 

"The Union Budget has been presented at a time when we are going through the most turbulent times in recent memory. Also, the India-USA trade deal is still hanging fire (and so, amongst other things, exports need a boost), and FPIs have pulled out hugely in 2015 (and the pullout continues). Also, share of manufacturing GDP is still quite low, and manufacturing is also very crucial in employment generation. 

In this context, there was need to address some of these issues (ie foreign investment, manufacturing and exports), but whilst some substantive measures (like broadening and deepening safe harbour provisions, TCS rate reduction etc) will bring some relief, and some procedural and penalty simplifications will help, one would venture to say that the need for much bolder tax reform was badly needed (including need to rationalise highest individual tax rates kicking in at a very low threshold, MnA tax provisions badly needing a relook etc), but unfortunately, none of that has been done. 

Overall, disappointed."

"The Budget strikes a clear note of continuity.  There is nothing negative in the fine print too.  From a tax perspective, the government has stayed the course on predictability and resisting the temptation of headline-grabbing rate changes while focusing instead on administration, enforcement and digitisation.  The FM mentioned “People over Populism” in the first paragraph of her speech and she stuck to that.  And prioritising long-term public welfare over short-term, crowd-pleasing measures is clearly visible for instance in maintaining the capital gain regime. 

What stands out is the steady move towards a trust-based but technology-driven tax system. The changes relating to penalty being converted to fees and rationalising prosecution provisions are welcome.   On the direct tax side, stability in rates combined with rationalisation measures reinforces the message that widening the base is preferred over raising rates.  The amendments addressing the issues on assessments procedures (timelines, DIN, etc) are welcome though retrospective since it unclogs a lot of the court bandwidth and gives certainty for the future.  Addressing the buy-back taxation issue is another positive step.  

Budget shows that the Ministry of Finance and the FM had their ears to the ground. A lot of the changes are in response to what was being highlighted as an issue. TCS, Buy-back taxation, Transfer Pricing are examples.  After a long time, we have new tax holidays introduced and there are two heartening things about that. Firstly, these are for sectors which are where investments are needed now and would happen and secondly, these are fairly long term tax holidays.  Finally, the changes relating to safe harbour, APA would be music to the ears of GCCs and IT/ITES outfits of MNCs operating in India.  

All-in-all a non-disruptive Budget with a lot of positive aspects."

“The expansion of Safe Harbour thresholds to ₹2,000 crore and the rationalisation of margins at 15.5% in Budget 2026 is a welcome move that enhances tax certainty and reduces transfer pricing disputes for multinational and GCC entities in India. This reform is likely to lower compliance burden, improve predictability in tax outcomes, and strengthen India’s attractiveness as a global services and innovation hub. Going forward, clarity on sector-specific applicability, periodic margin reviews, and alignment with global benchmarking will be critical to ensuring that the regime remains both competitive and sustainable.” 

Hon’ble Finance Minister (FM) Ms. Nirmala Sitharaman presented the Union Budget 2026-27, which embarks on the path to prosperity, establishes focus on sustainability, growth and moderate inflation. The Budget reflects a clear continuation of the Government’s reform-led, investment-driven growth strategy, while consciously maintaining fiscal discipline in a volatile global environment. A key overarching observation is that this Budget is less about headline tax giveaways and more about structural strengthening of the economy, compliance simplification, and long-term competitiveness.

Direct Tax Propositions –

With the unlikely expectations of the changes in direct tax considering the New Income Tax Act, 2025 will be effective from April 01, 2026 i.e. (Financial Year 2026-27), emphasizing on the good governance with continuing a historical trend, key direct tax proposals include:

• The Union Budget introduces one of the most ambitious tax reforms of recent decades, with the Income Tax Act, 2025, ushering in a simplified, technology‑driven and compliance‑light tax framework.  The Government’s intent is clear to modernise administration, reduce friction for taxpayers, and enhance voluntary compliance. The move to rationalise TCS rates, a number of ease‑of‑compliance measures such as simplified return filing dates, a more accessible nil‑deduction certificate mechanism, consolidated handling of Form 15G/15H for security holders, flexible revision of returns up to 31 March, and a temporary tax account number for non‑residents purchasing assets reflect a shift towards a more taxpayer‑centric system.
• The introduction of a one‑time foreign income and asset disclosure scheme, combined with calibrated penalties (30% of undisclosed income, 30% of asset value, and 30% penalty) and immunity from prosecution, aims to bring undeclared offshore wealth into the formal economy while offering taxpayers a clean slate.
• The memorandum reiterates the Government’s intent to make the new tax regime the default by mandating domestic companies to use the accumulated MAT credit for 4 years w.e.f. April 01, 2026.
• The Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 is an important compliance-focused measure. It provides an opportunity for genuine small taxpayers to regularise undisclosed foreign assets with immunity from penalty and prosecution, reinforcing voluntary compliance while ring-fencing habitual offenders. This reflects a calibrated approach rather than a blanket amnesty.
• Extension of Deduction Period for IFSC units and OBUs to 20 consecutive years from 10 consecutive years and rationalising the post‑holiday tax rate to 15%, the Government has reinforced its commitment to positioning IFSC as a globally competitive financial hub. This long‑term certainty will significantly strengthen investor confidence and attract foreign investors into GIFT IFSC.
• The recharacterization of buy‑back taxation aligned with capital gains taxation for small shareholders to curb arbitrage, with differential promoter taxation (24% for corporate promoters and 30% for others), indicates an effort to close existing loopholes. This would incentivize companies to pursue buybacks.

Transfer Pricing Key highlights –

• On the transfer pricing front, the Bill boosts India’s competitiveness by liberalising Safe Harbour—merging software development, KPO, contract R&D and ITeS into a single IT category with a 15.5% margin under a rule-driven process.
• Fast-tracked unilateral APAs for IT, targeted for conclusion within two years, enhance certainty and taxpayer confidence. The proposed tax holiday till 2047 for foreign data-centre players and a 15% safe harbour on India-related transactions underline India’s push to become a global digital-infrastructure hub.

FEMA Regulatory Propositions –

• The FM proposes to reform Non-debt Instrument rules by reviewing it comprehensively to boost economic investment by the foreign investors. With aiming ease of doing business for Person Resident Outside India (PROI), the budget proposes that PROI can now invest into equity instrument in the listed companies through portfolio investment scheme with enhancing individual limit from 5% to 10% with aggregate investment limit to 24% from existing limit of 10%.

Overall, Budget 2026–27 is a consolidation Budget:

Overall, Budget 2026–27 is a consolidation budget that emphasises tax stability and certainty, deeper administrative reforms, and long-term economic capacity building over short-term populist measures. This strategy is expected to enhance India’s credibility as a stable, investor-friendly jurisdiction over the medium to long term. With a projected growth rate of 7%, a declining debt-to-GDP ratio of 55.6%, and a reduced fiscal deficit of 4.4% of GDP, the Indian economy is firmly on a path toward sustained prosperity and an enhanced global standing, despite prevailing geo-economic challenges.

"While there are some good proposals, I feel that the direct tax proposal contains too many tinkering and therefore it would be most appropriate to respond only after carefully reading the Finance Bill 2026.  

I hope that the bill does not take away the benefit granted under one provision taken away by introducing some other change… like MAT in tax exempt data Centre."

“The Finance Budget 2026 anchored in the Government’s three‑pillar kartavya framework—accelerating growth, building capacity, and ensuring inclusive development, the Budget provides a clear directional shift toward tax certainty, compliance simplification, and capital formation. 

A major highlight is the implementation roadmap for the new Income‑tax Act, 2025, effective 1 April 2026, with redesigned forms, streamlined procedures, and staggered return‑filing timelines to ease compliance, particularly for small taxpayers and businesses. The Budget proposes extended timelines for revised returns, simplified TDS/TCS procedures, and automation‑driven lower/nil deduction certificates, signalling a strong move to reduce friction in day‑to‑day taxpayer interactions. 

On the corporate side, the rationalisation of buyback taxation, transitioning it to a capital‑gains‑based model with differential promoter rates creates long‑term clarity for capital‑allocation decisions. The Budget sharply enhances safe harbour thresholds for IT/ITES, accelerates APA processing, and provides targeted incentives for data centres, global capability centres, toll manufacturing, and IFSC units, positioning India competitively in global supply chains and cross‑border service ecosystems. For individuals, the reduction in TCS on LRS remittances and overseas tour packages, duty rationalisation for critical medical imports, and a foreign asset disclosure window for small taxpayers address long‑standing pain points. 

The Government’s push for trust‑based tax administration, decriminalisation of several offences, integration of assessment and penalty proceedings, indicate a maturing tax environment that favours predictability and lowers litigation. 

Overall, Budget 2026 balances growth‑orientation with administrative pragmatism, reinforcing India’s trajectory toward a high‑investment, high‑productivity, digitally governed economy.”

From "Viksit Bharat" Ambition to "Kartavya" Execution

Budget 2026 marks a paradigm shift from fiscal stimulus to structural "Kartavya" (duty), focusing on three pillars: accelerating growth, building people's capacity, and ensuring inclusive resource access. With a projected GDP growth of ~ 7%, the Hon’ble Finance Minister has avoided the populist trap, instead doubled down on India’s role as a global manufacturing alternative. Economic & Structural Anchors - The centrepieces are India Semiconductor Mission (ISM) 2.0 and an increased ₹40,000 crore electronics components manufacturing scheme outlay. These are not just subsidies, but "Tariff-Busters" designed to lower domestic production costs to counter global trade barriers, such as the US tariffs.

The rejuvenation of 200 legacy industrial clusters, integrated program for labour-intensive textile sector, and the launch of Rare Earth Corridors across Odisha, Kerala, Andhra, and Tamil Nadu signal a move toward vertical integration - securing the raw materials (critical minerals) and the infrastructure needed to operationalize the recently concluded FTAs and promote exports.  Tax & Regulatory Implications - The most significant structural reform is the sunset of the 1961 Income Tax Act, replaced by the New Income Tax Act, 2025, effective April 1, 2026. This "reboot" aims to halve the volume of tax law, moving from an "Assessment Year" mindset to a single "Tax Year" structure and a simplified regulation. A 5-year tax exemption for specific non-residents under notified schemes, 15% safe-harbor for data centres coupled with tax holiday until 2047, expanded safe-harbour and fast track APA for IT services provides is a bold bid to capture the global AI and cloud landscape.  In essence, Budget 2026 is not designed to surprise—it is designed to reassure. Its themes reflect a mature reform mindset where trust in institutions, predictability in tax policy, and competitiveness through execution form the foundation of India’s growth strategy.

"The Union budget 2026 reflects a carefully calibrated policy stance that balances growth imperatives with fiscal prudence. The continued thrust on public capital expenditure, infrastructure creation, and manufacturing-led growth is well judged, particularly at a time of global uncertainty. The Budget is clearly anchored around the framework of three kartavya—accelerating economic growth, building capacity to fulfil aspirations, and ensuring inclusive development. Measures aimed at easing tax compliance, rationalising duties, and supporting exports and energy transition signal continuity in reforms rather than abrupt shifts, which is essential for sustaining private investment and medium-term growth. Tax proposals largely focus on simplification and rationalisation rather than stimulus, suggesting that the intent is to improve compliance and efficiency rather than driving short term consumption. At the same time, the budget consciously prioritises inclusion and capacity building through targeted interventions in skilling, healthcare, regional development, and MSME support.

On the taxation front, there are several key changes such as making unilateral APA timebound for IT sector, widening scope of safe harbour provisions, substantial reduction in safe harbour rates for IT sector/ KPO etc. which would provide long pending certainty to multinationals and likely to attract interest of foreign enterprises for commercial activities in India."

"The proposals concerning Customs law are oriented to streamline processes and improve the “ease of doing business” index and in this context the Customs Integrated System (CIS) will be rolled out in two years as a single, integrated and scalable platform for all the customs processes and, separately approvals required for cargo clearance from various Government agencies will be seamlessly processed through a single and interconnected digital window by the end of the financial year. Customs processes are set to have minimal intervention and faster movement of goods. The proposals in the Finance Bill are directed to support importers and smoothen customs procedures, for which, Authorised Economic Operator’s (Tier 2 and Tier 3) will be allowed enhanced duty deferral period, SEZ’s will be permitted (a special measure) to clear goods into the domestic tariff area at concessional duty rates, baggage clearance procedures will be modified to address genuine concerns of passengers. 

The various incentives schemes, viz. Biopharma Shakti scheme with allocation of Rs. 10k crores, Electronic Components Manufacturing Scheme with revised allocation of Rs. 40k crores, container manufacturing scheme with an allocation of Rs. 10k crores, scheme to support establishment of three chemical parks, Construction and Infrastructure Equipment (CIE) scheme to strengthen domestic manufacturing of high-value and technologically advanced equipment, coupled with strategic duty rate rationalization for e.g. batter separators are welcome but more importantly will support Indian manufacturing and prepare champions for the international market."

"While I need to go thru the provisions of Budget in detail but my immediate attention is drawn to amendments in Direct Taxes which are welcome measures.

1. Introduction of Safe harbor of 15.50 for all IT services

2. ⁠Enhancing the upper limit to 2000 crore Safe Harbor for IT Compankes

3. ⁠Introducfion of Tax Holiday for Data Centers

4. ⁠Integrating ICDS with Ind AS

5. ⁠De criminalisation of offences

6. ⁠Rule based process for lower deduction of TDS certain small tax payers

Pillar 2 for appears to be bleak for India, considering that India is providing more tax holiday for data centres as the Government is desirous of getting more foreign investment."

“While one needs time to go through these documents, some of the glaring changes were quite overdue. The changes to decriminalisation of minor offences, and resultant changes in Section 276, are truly thoughtful- the monetary limit of Rs 10 lakhs - particularly compared to the unrealistic threshold limit of Rs 10,000. Similarity, amendments in Section 144C and insertion of 147A are quite understandable- these hyper-pedantic arguments were going a bit too far. The time limit for revision of returns, which was just 30 days in some case, has also been well rationalised. The budget seems quite thoughtful in many ways.” 

“ Technical issues ,viz. FAO / JAO , Roca Bathrooms/ Shelf Drilling  limitation and DIN issues sought to be put to rest by way of a clarificatory amendment proposed with retrospective effect . These retrospective amendments are notwithstanding any judgment, order or decree of court. 

Need to see how Vatika Township Private Limited and M.M. Aqua Technologies Ltd. would play out.In M.M. Aqua Technologies Ltd. v. CIT [2021], the Supreme Court analyzed Explanation 3C to Section 43B (inserted retrospectively to deny deductions for interest converted into loans). The Court relied on Vatika's principles to ensure that such "Explanations" do not unfairly strip away vested rights when they are not truly clarificatory of the original intent.

The above issues too create Vested rights."

"The income tax act 2025 has been promulgated, but it’s to take effect from 1 April 2026.

Even before it takes effect, the Finance Bill says that it is to be amended and there are as many as 87 clauses to amend this act!

That is truly shocking! We need stability in our laws and not these multiple changes every few months!
The CBDT should have thought about these matters a few months ago and brought in a path-breaking.Finance Bill- one that does not change the tax laws!"

1. Introduction of a 15.5% Safe Harbour for all IT Services and increase the revenue threshold to Rs 2,000 cr as mentioned in FM’s speech are very positive steps – MNCs doing business in India will welcome the certainty on this topic which has often been the most litigated point.
    
2. MAT credit carry forward no longer being allowed along with reduction of MAT rate from 15% to 14%. This amendment also comes with MAT credit set off being allowed only against normal tax liability under new tax regime upto 25% of tax liability for domestic companies and upto the difference between MAT tax and Normal tax for foreign companies. So companies currently under the old regime due to MAT credit will need to rethink their approach.
    
3. Buyback taxation shifted back to Capital Gains regime in sync with international norms. However, Domestic Company Promoters and Other Promoters being subjected to additional Tax leading to an effective tax of 22% or 30% respectively in certain cases means that tax impact of conducting buybacks on various categories of shareholders need careful consideration.
    
4. Gift City business income to have a 100% tax holiday for 20 consecutive tax years out of 25 years instead of the current 10 out 15 years and concessional tax rate of 15% extended post tax holiday period make the Gift City opportunity even more attractive.  Further, specific reconstruction and splitting up conditions have been introduced.
    
5. Decriminalisation of various prosecution provisions is a welcome step in the right direction.
    
6. Introduction of specific retrospective amendments in both the old Income-tax Act and the new Income-tax Act support the Government’s point of view on some very keenly contested issues like the Roca Bathroom case on transfer pricing deadlines, the powers of a Jurisdictional Assessing officer to initiate 148 assessments and validity of assessment orders where are there are some minor errors in DIN. The approach seems to be to focus on merits of the issues involved rather than allowing technical arguments to invalidate orders of the officers itself.

Overall, we live in interesting times with around 100 clauses of amendments in the new Income-tax Act even before it comes into effect on 1 April 2026."

“Overall, the tax reforms in Budget 2026 reflects a clear policy intent to prioritise simplicity, predictability, and taxpayer confidence while safeguarding revenue stability.

The direct tax reforms are expected to improve voluntary compliance, reduce litigation, and enhance ease of doing business, thereby strengthening India’s long-term direct tax framework. The headline reforms are quite progressive such as the tax breaks for data centres and toll manufacturers, boost for GCCs with rational safe harbour limits, buy back to non promoters treated as capital gains boosting the consumption economy. Lastly, rationalisation of prosecution measures, immunity from penalty for misreporting and 6-month disclosure window for small taxpayers regarding foreign assets will bring in more trust and transparency in the overall tax administration.

On the indirect tax side by slashing duties on personal imports and exempting critical cancer medicines , the budget directly lowers the cost burden on households. Simultaneously, the strategic removal of customs duties on raw materials for sectors like aviation MRO, EVs, and Battery Energy Storage Systems (BESS) is designed to deepen domestic value addition and support the country's energy transition."

"1) Budget 2026 reflects policy maturity rather than populism. The focus on manufacturing-led growth, customs rationalisation, infrastructure spending and digital economy signals long-term intent and stability. While incremental tax relief for salaried taxpayers and retirees would have been welcome, the broader thrust on healthcare, MSMEs, insurance stability, real estate confidence and global digital services positions India strongly for sustainable growth. This is a Budget that reassures investors, empowers industry, and prioritises execution over experimentation.

2) The retrospective clarifications in Budget 2026 aim to settle jurisdictional and procedural disputes arising from conflicting High Court rulings such as Roca Bathrooms and Shelf Drilling. By validating reassessment triggers, DIN-related lapses and DRP timelines, the proposals seek to reduce litigation driven by technical ambiguity. While retrospective amendments may invite debate, the broader intent appears to be certainty and closure rather than revenue aggression. "

Budget 2026: A New Era of Tax Certainty, Digital Infrastructure Incentives & Global Investment Momentum

"The Union Budget 2026, in the spirit of Reform Express and Yuva Shakti, introduces a comprehensive suite of measures aimed at strengthening India’s position as a reliable, future‑ready tax and investment jurisdiction, significantly impacting multinational enterprises, including but not limited to foreign investors, and Global Capability Centres (GCCs).

A landmark announcement is the tax holiday until 2047 for foreign companies providing cloud services using data centres located in India, aimed at positioning the country as a global cloud and digital infrastructure hub. Companies must service Indian customers through a reseller entity, and a 15% safe harbour on cost is offered where the Indian data‑centre operator is a related entity. This long‑term incentive aligns with India’s ambition to anchor hyperscale cloud capacity and boost domestic digital infrastructure. 

On the transfer pricing front, the government has undertaken a sweeping overhaul to ease transfer pricing litigation by proposing much awaited rationalisation of safe harbour Rules as well as certain amendments in the APA regulations. The Safe Harbour eligibility threshold for IT and ITeS (including related contract R&D and KPO) services is raised from ₹300 crore to ₹2,000 crore, significantly widening access to pre‑determined margins and reducing litigation exposure. A unified 15.5% Safe Harbour margin now applies across all IT‑related services, and approvals will transition to an automated, rule‑driven system, eliminating officer-level review. While this amendment would definitely make safe harbour a go-to alternative to Unilateral APA for IT related services, Bilateral APAs may still be considered by taxpayers looking at corresponding relief in the AE jurisdiction as well as those looking at a further concessional rate than the safe harbour which the foreign Competent Authorities may now attempt to negotiate.

To further strengthen tax certainty, the unilateral Advance Pricing Agreement (APA) process will be fast‑tracked to two years, with a possible six‑month extension upon application by the taxpayer, providing multinationals with faster dispute‑free TP outcomes. Importantly, Associated Enterprises (AEs) entering into an APA may file modified returns, ensuring alignment between agreed TP positions and tax filings. Despite several positives, one of the much awaited clarification on the definition of Associated- enterprise, under the New Income Tax Act is missing from the fine print. Hopefully, this can be addressed by way of an amendment to this Bill before the same is passed by the Lok Sabha, so as to make this a complete transfer pricing reform bonanza - to put to rest future contentious disputes. 

Last but not the least, Budget 2026 also pushes taxpayers away from technical litigation towards substantive, merit‑based tax resolution. This comes against the backdrop of several recent high‑profile disputes where taxpayers relied on technical interpretations to challenge assessments. One prominent example is the Shelf Drilling case, where the Supreme Court delivered a split verdict on whether Dispute Resolution Panel (DRP) timelines get subsumed within the overall assessment timelines under erstwhile Section 153. This approach aims to reduce backlog, prevent escalation of avoidable disputes, and bring uniformity in tax administration. 

These reforms collectively reinforce India’s attractiveness for FDI by promoting predictability & tax certainty , reducing compliance friction, and lowering tax‑related investment risks. For GCCs, already central to India’s services and innovation ecosystem, the enhanced Safe Harbour thresholds, streamlined APAs, and new digital‑infrastructure incentives will accelerate scaling of high‑value global operations."

“Well, to be fair to the Government, many of the changes reflect policy changes that weren't in the scope of the simplification process."

"The Foreign Assets of Small Taxpayers Disclosure Scheme, 2026 is a positive announcement by the Government aimed at enabling taxpayers to regularize past non-compliances relating to foreign income and assets, thereby avoiding potential tax demands, penalties, and prosecution. While the expectation was that this scheme will be a more inclusive scheme, it applies only to small taxpayers. The Scheme will cover two categories of taxpayers. First, taxpayers who failed to disclose foreign income or assets, where the undisclosed amount does not exceed INR 1 crore. Such taxpayers will be required to pay tax at 30% on such undisclosed income and / or foreign asset along with additional amount calculated at 30% (so an aggregate cost of 60% as against 120% (being 30% tax and 90% penalty) interest and possible prosecution, if proceedings were to be initiated by tax authorities). Such payment of 60% will grant immunity from penalty and prosecution. Second category is for taxpayers who acquired offshore assets as non-residents or taxpayers who disclosed foreign income and paid due taxes but failed to report the foreign asset, where the asset value is up to INR 5 crore. In such cases, normally an adhoc penalty of INR 10Lac and prosecution risks would apply, however declarants under this scheme will be granted immunity on payment of a fee of INR 1 lakh. Amount paid under the scheme will be non-refundable and these declarations will have no impact on completed assessments or will not entitle declarants any claims, relief or set off in ongoing appeals, references, etc."

• India continues to be the “Service Hub” to the World and continue to contribute to India’s growth engine. 
• To encourage the above & give certainty, avoid / minimise litigation & setting up more Global Capabilities Centre at India, it is proposed that    

- avoid hair splitting within the various services by clubbing of software development services, IT enables services ,KPO & Contact R&D services under a single category of Information Technology   Services    

• Proposed Safe Harbour Margin of 15.5%   

         The above measures as announced in FM speech will also encourage the employment of talent & various supporting ecosystem once the Safe Harbour norms are notified. 

• Proposed provision of reducing the Administrative / Compliance burden of the foreign related party unable to claim refund of taxes presently withheld on royalty, interest, inbound management charges by the India related party by modification of return of income by the foreign related party as a result of APA entered by the Indian related party is also welcome.     
• Extension of the period of deduction for units in IFSC from 10 to 20 years is also very positive. This will assist in making IFSC more attractive and making India as a Financial Center as

Singapore / Hongkong though India has some distance to travel as these countries. 

While one needs to read the fine print – clarification is proposed that loan / advance given by a treasury center at IFSC to a group company may not be considered as deemed dividend."

Union Budget 2026: Key Tax Takeaways

This article has been co-authored by Manjit Bhimajiani, Associate Partner, Dhruva Advisors Private Limited.

"Budget 2026 focuses on job creation, incentives for manufacturing and services, and rationalising certain directions towards Viksit Bharat.

One expected that not much would change on Direct Taxes, as the new Income Tax Act, 2025 would apply from 1-4-26. However, we find some important and far-reaching changes in areas such as MAT tax levy (rate being reduced to 14% from 15%), its credit availability (restricted to 25% of the tax under the new regime), MAT being treated as final tax for the future, and non-residents opting for presumptive taxation being kept outside the purview of MAT.

Buy-back tax moving back to capital gains is beneficial to retail investors, as the tax rate reduces to 12.5% for non-promoters. However, promoters would pay a higher tax.

The deduction period under Section 80LA is increased to 20 consecutive years (out of 25 years) for IFSC units and for 20 consecutive years for Offshore Banking Units.

The controversy over the time limit provided under Section 153 vis-à-vis Section 144C(13) has been clarified with retrospective effect from 1-4-2009. Now, where a draft order is litigated before the DRP, the time limit gets extended beyond the period prescribed under section 153 for passing the final order.

The deduction of INR 2 lakh is inclusive of prior-period interest while computing income from house property.

New guidelines are proposed to be issued to remove difficulties in giving effect to the TDS/TCS chapter, which will be binding on Income-tax Authorities as well as on persons liable to deduct or collect income tax. Hopefully, this will reduce and/or rationalise penalties and prosecution for TDS defaults that are made good before detection by any tax officer.

Enhancement of limits for investment in listed securities up to 24% for Persons Resident Outside India is welcome, as it provides opportunities to Indian citizens residing abroad and will help India attract more foreign exchange.

A rule-based automated process to obtain lower TDS certificates to simplify compliance and ensure quicker issuance is also a positive step.

Overall it’s a balanced budget where some anomalies/ litigative interpretations are sought to be addressed."

"Even while the new Income-tax act is around the corner, Hon’ble Finance Minister proposed a host of changes in the direct tax provisions, both substantive and procedural.  Most of these proposals are focusing on ease of taxation and compliance. 

Proposal to convert many penalties to fees would be a major relief.   Also, proposal for reduction in TCS rate for Education, Health and Tourism helps in a significant manner for taxpayers on their cash flows. 

In the area of transfer pricing, proposal to consolidate all IT and ITeS services under one umbrella and proposing a single rate of 15.5% Safe Harbor rate offers is a significant change, and would offer a huge relief to these categories of taxpayers.  Further, increase in the turnover limit to INR 2000 crores from INR 300 crores will certainly widen the number of eligible taxpayers.  This also helps in avoiding the litigation considerably.  Also providing timeline for completion of UAPA accelerates certainty for the taxpayers.  

Hopefully, the tax incentives proposed for foreign taxpayers on income from India by way of procuring data center services from a specified data centers will help attract more investments in this growing area. And, the timeline of 31 March 2047 also provides a long runway for these companies.  

Overall, the Union Budget 2026 reaffirms the current government's focus on ease of doing business, continuation of reforms and consolation of the efforts of the past rather than any big bang approach."

“Direct tax - 60 pages Memorandum and Finance Bill around 100 pages and 120 clauses - so not many pages in fine print (prima facie )

Focus on reducing discretion and rule based approach (forms , customs , lower TDS) , simplify process and penalty and litigation

IT safe harbour will boost GCC ecosystem and reduce TP litigation

MAT sunset in 2026 will make new regime must for companies

Personal tax regime for foreign talent is welcome too.  

Buyback tax capital gains treatment is welcome

No word on Pillar 2 and Equalisation levy

New Tax Law is coming - anxious wait for new rules."

"Budget 2026 signals a strong push towards tax simplification, certainty, and sector-specific incentives aimed at boosting investment and compliance. 

A significant development is the introduction of the Income Tax Act, 2025, effective from 1 April 2026, with the stated objective of simplifying provisions and making tax laws easier for taxpayers to understand and comply with. In line with this intent, the government has introduced enhanced safe harbour provisions for the IT and IT-enabled services sector by increasing the threshold to INR 2,000 crore. These cases will be eligible for an accelerated Advanced Pricing Agreement (APA) programme, with a proposed time limit of two years for conclusion, extendable by six months at the taxpayer’s request. This move is expected to provide greater certainty and reduce prolonged transfer pricing disputes. To promote the digital economy, the government has proposed a tax holiday until 2047 for foreign companies providing global cloud services using data centre infrastructure in India. Correspondingly, safe harbour rules have been extended to resident companies providing data centre services to related entities, reinforcing India’s position as a global digital and data hub. On the compliance front, property-related procedures for non-resident Indians have been simplified by replacing the requirement of a Tax Deduction Account Number (TAN) with a PAN-based challan of the resident buyer for property transactions. 

Further, the government has proposed a time-bound scheme for declaration of foreign assets and foreign-sourced income, offering limited immunity from penalty and prosecution under the Black Money Act, subject to conditions and exclusions. Declarants have been categorised based on asset value thresholds of INR 1 crore (where assets/income have not been disclosed) and INR 5 crore (undisclosed assets located outside India acquired from income which has been offered to tax). Importantly, clarity has also  been provided on timelines for completion of assessments involving non-residents and transfer pricing disputes referred to the Dispute Resolution Panel, ( an issue which has been a subject matter of ligation before various High Courts as well as a split decision of the Hon’ble Supreme Court), confirming applicability of timelines under section 153. Lastly, the taxation of share buy-backs is being modified by treating proceeds as ‘capital gains’ instead of dividend income, with a differentiated tax regime for promoters (tax liability of 30%) and promoter companies ( tax liability of 22%). This will likely have significant impact for promoters holding their stakes thru Hold Cos. 

Government has also clarified the controversy regarding issuance of Reassessment notice by Jurisdictional Assessing Officer (JAO)/ Faceless Assessing Officer (FAO), by stating that not withstanding any decree/order of any Court, JAO shall be the competent authority to issue reassessment notices under the Act. 

It is also proposed to reduce the quantum of pre-payment in penalty proceedings from 20% to 10% and will continue to be calculated only on core tax demand. Though this is welcome initiative, it would have been better if this reduction in prepayment was also extended across the board for all the assessments and taxpayers. 

Government has also addressed the controversy relating to quoting of Document Identification Number (DIN) on the Order passed by income tax Authorities It has been clarified as long as there is a reference of DIN in the assessment order, the same would-be sufficient compliance even if there may be some minor mistakes, defects or omissions in notices or summons in relation to such assessment."

Our comments on the tax proposals announced in the Budget 2026 

"This year’s budget appears to be a very regular budget without any big headline grabbing announcements or any significant setbacks! The Hon’ble Finance Minister Nirmala Sitharaman (“FM”) appears to have resorted to an array of simple reform-oriented steps and clarifying certain ambiguities while providing a roadmap for foreign investors. 

Budget 2026 presented by the FM earlier today ushers a new era in the economic progress of the country. In addition to several far-reaching and long term initiated schemes announced by her, she may have several commendable moves to ensure clarity and certainty in the tax jurisprudence of India. Several steps on the direct tax front proposed by her seem to further strengthen such resolve including de-criminalisation of minor errors or mistakes, reduction in the amount of TCS collected by Travel Houses and Banks while making foreign remittances, simplifying the requirement of Indian residents while making payment to non-residents, simplifying the requirement regarding disclosure of foreign assets and income and rationalization of penalty and prosecution provisions, etc. 

Realising the importance of IT Services, she has proposed to significantly simplify the safe harbour rules by providing a much lower standard margin of 15.5% as well as increasing the limit for availing safe harbour to Rs. 2,000 is another step in the right direction. Her assurance that safe harbour shall be approved by an automated rule driven process is also a welcome move. Similarly, her proposal to complete the unilateral Advance Pricing Agreement within 2 years is another welcome proposal. Another important proposal is to create credible critical infrastructure in the field of data centres, by allowing them tax incentives for 20 years (out of the first 25 years) to foreign companies. The flexibility to such foreign entities to provide services through an Indian reseller entity and provision of safe harbour margin of 15% on cost in case of related entities are equally praiseworthy. 

To incentivize toll manufacturing in India, she has proposed to provide tax exemption to non-resident entities who are providing capital goods, equipment or tooling while global talent is proposed to given tax exemption on their non-India sourced income for a period of 5 years. The proposal to exempt foreign companies who are paying tax on presumptive taxation will go a long way to attract foreign investment. 

From a simplification perspective, the proposal to set up a joint committee consisting of officials from the Ministry of Corporate Affairs and the Central Board of Direct Taxes to incorporate the requirements of ICDS in the Ind-AS itself is an excellent move as it would not require separate accounting requirement based on the ICDS. 

Along with the above, several other simplification measures have been announced. 

We believe these changes are going to have a long term impact and propel our economy towards Vikasit Bharat!"

"The Finance Bill 2026 proposes 22 amendments in the ITA 1961 and 87 amendments in the ITA 2025. So the statutory window of the Finance Bill 2026 has been utilised well by the Legislature to iron out some unwarranted wrinkles in the ITA 2025. One such example is removal of the violation of the commercial receipts exceeding 20% of total receipts parameter in case of NPOs, from the registration cancellation criteria. This issue was highlighted in Taxsutra's pre-budget special article contributed by me.

More importantly, the amendments pertaining to legacy jurisdictional issues although being projected as technical grounds, like JAO-FAO, DIN and shelf drilling controversies, have also been made, so as to commence the new Act, with a clean slate and an unambiguous stand clearly coming out of the plain language of the respective sections of the new Act itself, w.e.f. 1.4.2026. However, the same amendments in the ITA 1961, although now being proposed as clarificatory Explanations, and more interestingly with the wordings, "notwithstanding anything contained in any judgement, order or decree of court...", in my humble understanding, will still be tested in the Courts for tgeir retrospective application, in view of many SC judgements holding that merely the usage of clarificatory language in the amendments, will not make those amendments retrospective. Interestingly, an altogether new section 147A has been proposed to be inserted in ITA 1961, so as to provide retrospective authorisation to the JAO to issue 148 notice, by using the words, "for the removal of doubts". However can the insertion of an altogether new section in the Legislature, be made applicable retrospectively.

Further the consolidation of assessment and penalty proceedings within one combined order, also nullifies the well settled legal position that penalty can't be levied merely on making of additions.

Another interesting development is the entry of the 'alphabetical numbering' along with numerical numbering of section, in the ITA 2025. A new section 354A has been inserted in ITA 2025 in respect of merger of registered NPO in certain cases. This insertion highlights the irony of renumbering section numbers only containing numbers, at the time of drafting ITA 2025, for better optics, and the now arising necessity to accomodate budget amendm"

With gold prices hitting record highs recently, investors have been flocking to Sovereign Gold Bonds (SGBs) as the ultimate "safe haven" asset. However, the Finance Bill 2026 just introduced a significant curveball that changes the math for anyone buying these bonds on the stock exchange.

1. The "Original Subscriber" Rule

Under the previous regime, anyone holding an SGB until maturity enjoyed a tax-free exit on capital gains, regardless of where they bought it. The New Income Tax Act, 2025, changes this fundamentally:

Restriction: The capital gains tax exemption at redemption is now only available to the original subscriber.
Strict Requirement: You must have subscribed to the bonds during the initial RBI issue and held them continuously until maturity to claim the exemption.

2. Impact on Secondary Market Buyers

If you have been buying SGBs from the stock exchange (secondary market) to take advantage of the tax-free maturity, the rules have changed:

No More Exemption: Gains upon redemption for secondary market buyers will now be treated as taxable capital gains.
Uniform Application: This rule applies across all RBI bond series, leaving no room for ambiguity.

3. Why the Crackdown?

The government’s intent is clear: they want to reward long-term primary investors rather than those trading bonds in the secondary market to secure tax-free exits.

The takeaway: With gold prices soaring, SGBs are still a great hedge, but the "tax-free" charm has now been restricted to primary investors only. If you’re buying from the exchange, factor in the new tax cost!

First Take on the Union Budget 2026

"In her Budget Speech, the Hon’ble Finance Minister articulated three key Kartavya for the Union Government — accelerating economic growth, fulfilling citizens’ aspirations, and ensuring inclusive development. The direct tax proposals announced this year are not mere technical adjustments but a reflection of these duties. Rationalising MAT, aligning the same with Accounting standards and simplifying transfer pricing rules are steps to make India a more attractive global investment hub accelerating economic growth. Citizen’s Aspirations of global education, healthcare, and mobility are supported when compliance is made easier and costs reduced. The one-time six-month foreign asset & income disclosure window for small taxpayers offers a fair chance to regularise past omissions and LRS relief make overseas education, investments and employment smoother and more affordable for individuals.

Inclusivity means protecting small taxpayers and SMEs from disproportionate compliance costs. Simplified TDS rules extend fairness across the tax system. It is not just the relief but inclusivity is also about trust and proportionality. By differentiating between wilful evasion and genuine compliance lapses, the Budget introduces a more inclusive approach. Together, these amendments reflect a tax policy that is not only technical but deeply aligned with the government’s broader duties to its citizens. The government’s decision to go ahead with the new Income Tax Act without deferral signals a strong commitment to reform of tax laws. At the same time, the number of amendments in the Finance Bill shows that the government is not treating this as a static exercise—it’s actively fine‑tuning provisions to balance global competitiveness, taxpayer convenience, and inclusivity.

On the flip side, there are a couple of proposals which require a rethink. One is the increase in the rates of STT which has not been taken well by the stock markets and the other is the issue of retrospective amendments. "

Budget 2026: A Shift from ‘Tax Relief’ to ‘Tax Reform’

The Union Budget 2026 will be remembered not for its changes to tax slabs, but for its commitment to structural integrity. Following the significant tax cuts of 2025, Finance Minister Nirmala Sitharaman has signaled a phase of consolidation, officially ushering in the New Income Tax Act, 2025. For the individual taxpayer, this budget is less about immediate liquidity and more about the long-term "Ease of Compliance."

The Transition to a Modern Tax Code

The primary headline is the effective transition to the New Income Tax Act on April 1, 2026. This is a milestone in India’s fiscal history, aiming to replace decades of complex amendments with a leaner, more readable code. It reflects a government intent on reducing the "trust deficit" between the taxman and the taxpayer.

Key Wins: Empathy and Practicality

Several "silent" reforms in this budget provide significant relief to specific cohorts:

• The March 31st Extension: Taxpayers now have until March 31st to file revised returns. This is a major win for the global workforce and expatriates whose home-country tax cycles (often calendar years) frequently clash with India’s fiscal year.

• TCS Rationalization: The simplification of Tax Collected at Source (TCS) to a flat 2% for foreign travel, education, and medical remittances is a welcome move. It eliminates the administrative nightmare of tracking different thresholds and improves immediate cash flow for middle-class families.

• Decriminalization of Defaults: By rationalizing penalties and introducing a voluntary disclosure scheme for foreign assets, the government is offering a "clean slate" to honest taxpayers and returning NRIs who may have committed inadvertent reporting errors in the past.

The Missing Piece: The Capital Gains Puzzle

While the budget excels at procedural simplification, it stops short of addressing one of the most significant pain points: Capital Gains taxation. Investors were hopeful for a grand unification of holding periods and tax rates across asset classes—equities, debt, and real estate. Currently, the system remains a complex maze that often deters the average retail investor. A streamlined "one-asset, one-period" framework remains the final frontier for a truly simplified tax regime.

The Verdict

Budget 2026 is a "Trust-Based" budget. It chooses stability over volatility and process over populism. For the individual taxpayer, the message is clear: the era of complex tax planning is fading, replaced by a system that prioritizes transparency and ease of filing. While we await the Forms and Rules of the New Act, the direction is undoubtedly toward a more mature, investor-friendly India.

Union Budget 2026 – Initial Reaction

"Union Budget 2026 first of all did not attempt at any big bang announcements

introduces wide ranging tax changes aimed at simplifying administration, reducing disputes, and encouraging honest compliance, while still protecting government revenues.

 It offers relief by decriminalising many technical tax offences, easing compliance timelines, merging penalties with assessment orders, and providing incentives such as longer tax holidays for IFSC units, cooperative societies, and certain global investments. Small taxpayers benefit from higher thresholds under black money laws and a one‑time foreign asset disclosure scheme, though the high tax cost may limit its use.

At the same time, the Budget raises concerns for businesses and investors through changes like making MAT a final tax at 14% under the old regime, taxing share buybacks more heavily for promoters, increasing STT on derivatives, and introducing several retrospective amendments that could create some  uncertainty. While measures such as GST rationalisation, customs simplification, and standardised TDS/TCS rates are practical improvements, the Budget implementation would require detailed guidance.

sOverall, the Budget signals a move towards a system based on discipline, predictability, and trust, rewarding transparent and well‑structured taxpayers."

“The budgetary announcements made by Hon’ble Finance Minister has drawn a split reaction amongst the taxpayers, between cautious optimism regarding simplification reforms and sharp disappointment over the lack of direct relief for the middle class and a sudden hike in market taxes. There has been a genuine effort to rationalise penalty related provisions and decriminalise the minor offences. However, at the same time, the fine prints did contain some burdensome announcements like passing of penalty order along with assessment order, non-eligibility of interest deduction in case of income arising out of mutual funds, increase in STT rates, etc. 

India’s growth story is intact and GDP growth numbers are impressive, more particularly when other developed economies are struggling. The Hon’ble Finance Minister has chosen not to disturb the apple card and treaded a balance approach, given the recent GST rate cut has already provided a boost to the consumption. 

The budgetary announcements has boosted the foreign investors’ confidence by introducing a unified safe harbour margin of 15.5% and tax holidays for foreign cloud service providers until 2047. 

Overall, the budgetary announcements are on expected lines. However, a little cheer for common man in terms of slight decrease in surcharge, could have been considered.” 

“Derivatives Costlier, Compliance Simpler: Key Tax Takeaways from Budget 2026 

Taking forward the vision of Sabka sath-  sabka vikas, Union Budget 2026 was presented by Finance Minister Nirmala Sitharaman in the Parliament today. The Budget focused on infrastructure led growth, boosting manufacturing and strategic sectors and providing tax reforms and ease of compliance measures. 

The Budget places a huge emphasis on public investment by announcing highest public expenditure of Rs. 12.2 lakh crores. The announcements also focused towards attracting Foreign Investments. 

On the tax front, the Budget places emphasis on rationalizing of filing of income tax returns , while also providing targeted relaxations in withholding tax requirements for specified transactions. The  Government has also proposed a significant increase in Securities Transaction Tax (STT) on derivatives trading, with STT on futures being raised from 0.02% to 0.05% and STT on options premium increased from 0.10% to 0.15%. These changes signal a clear intent to discourage speculative activity in the derivatives segment and to align tax collections with the growing volumes in capital markets. The higher STT is expected to increase transaction costs, particularly for high-frequency and intraday traders, which may lead to reduced churn and a shift towards longer-term investment strategies. 

The Union Finance Minister also announced a tax holiday extending until 2047 for foreign companies offering global cloud services through data centres located in India, underscoring the government’s strategic push to bolster the country’s digital infrastructure and position India as a global data hub.

To further bolster global investment, the Hon’ble Finance Minister announced a reduction in the processing timeline for Advance Pricing Agreements (APAs) to two years, with a provision for a one-time extension of up to six months. Additionally, the facility to file modified returns has been extended to associated enterprises entering into an APA. 

Overall, the Union Budget 2026–27 was a balanced budget driving the economy towards growth by focusing on infrastructure, manufacturing, FDIs. MSMEs  and ease of compliances.”.

“Overall, the Union Budget 2026–27 is a continuity Budget with a clear focus on growth supported by fiscal discipline. The government has stayed committed to fiscal consolidation while continuing to prioritise capital expenditure to support infrastructure creation, job generation, and long-term economic capacity building under the ‘Viksit Bharat’ vision.

From a direct tax perspective, instead of rate changes, the focus has shifted to simplification and ease of compliance. A significant development is the implementation of the new Income Tax Act, which seeks to simplify the language of the law, remove redundant and overlapping provisions, and rationalise complex concepts that have historically led to disputes. The objective is to make the law more transparent, easier to interpret, and more taxpayer-friendly, while also improving the efficiency of tax administration.

The Budget also introduces a series of procedural relief measures aimed at reducing compliance burden and litigation. These include rationalisation of TDS and TCS provisions to minimise duplication and mismatches, reduction in TCS rates on specified foreign remittances such as travel and education, and extension of timelines for filing revised and belated returns. Collectively, these measures are expected to ease cash-flow pressures, reduce inadvertent non-compliance, and significantly cut down on avoidable tax disputes.

Overall, the Budget reinforces predictability, ease of doing business, and a stable tax regime, while allowing the government to channel resources towards growth and infrastructure.”

“The Union Budget 2026–27 strikes a measured balance between growth imperatives and fiscal discipline. The government has stayed the course on fiscal consolidation while significantly stepping up capital expenditure to drive infrastructure development, employment generation, and manufacturing growth under the ‘Viksit Bharat’ vision.

From an indirect tax standpoint, the Budget is distinctly pro-trade and pro-business. On the Customs side, it focuses on rationalisation of duties, targeted exemptions for key manufacturing and export-oriented sectors (with notable support for battery energy storage systems and aircraft component manufacturing) alongside a strong push towards digitisation, single-window clearances, and risk-based processes.

Importantly, the Budget proposes greater flexibility for SEZ units to sell into the Domestic Tariff Area at concessional duties, with limits linked to export performance. This provides more predictable access to the domestic market while preserving the export-led character of SEZs. In addition, the customs warehousing framework is set to be modernised through self-declarations, electronic tracking, and risk-based audits. Overall, customs policy seeks to support manufacturing and exports while simplifying procedures, in line with the ‘Make in India’ and export-competitiveness objectives.

On the GST front, the emphasis is clearly on reducing litigation and improving cash flows. Proposed amendments seek to address long-standing issues relating to discounts, place of supply for intermediary services, and faster refunds — particularly benefiting exporters and MSMEs.

Taken together, the Budget sends a strong signal of enhanced ease of doing business, improved export competitiveness, and a more simplified and predictable tax administration.”

"Union Budget 2026 aims to propel supply side growth for the Indian economy. This is apparent in the tax certainty and benefits extended to foreign companies using data centers and toll manufacturing facilities in India. Extension of tax holidays to units in the IFSC also demonstrates a long-term vision and commitment to stable tax policy. These changes coupled with revised safe harbour norms for GCCs and fast track APAs should send strong signals to the FDI community. On the corporate tax front changes in buy back tax and MAT are big ticket changes that will impact profit repatriation strategies and corporate tax liabilities going forward. On the personal income tax side too, we saw several changes that look to alleviate process related hurdles for the small taxpayer such as procurement of nil or lower withholding tax certificates, extending timeline for revising tax returns, scheme to disclose foreign assets, reduction in TCS rates to name a few. All in all, Union Budget 2026 continues on the path of direct tax reform for growth and rationalization."

While there are no major changes to the direct tax provisions, there are a few insertions and deletions with a view to increase ease of living, ease of tax compliance and incentivise certain investments.

These can be summarised as follows :

• A reversal of taxation on buy- back of shares. The buy back will now be taxed as capital gains tax in the hands of non-promoter shareholders. It will be taxed at higher rates in the hands of promoters – 22% in case of domestic corporate promoters and 30% for other promoters. This is expected to draw balance between what is fair to the investors and arrest misuse by large shareholders who exercise control over company’s funds as also release the accumulated cash in the hands of corporates and presumably release for capex. One will need to see the fine prints to see if the capital loss from other assets would be allowed to be set off and how.
• A resident individual or HUF, is not required to obtain TAN to deduct tax at source in respect of payment for immovable property
• No tax or TDS on interest on compensation amount awarded by Motor Accidents Claims Tribunal to an individual
• To attract investment in data centre and promote artificial intelligence data centre framework in India, tax exemption is proposed to a foreign company, on any income arising in India till the end of tax year 31 March 2047. However, the foreign company  would be required to route the provision of data centre services to Indian users through an Indian reseller entity.
• Reduced rate of withholding at 1% paid to individuals or 2% paid to HUFs for manpower services
• Extension of time from 9 months to 12 months from the end of tax year for filing revised return
• Several procedural changes are made to ease tax compliances
• A new FOREIGN ASSETS OF SMALL TAXPAYERS DISCLOSURE SCHEME, 2026 is proposed.  Under this, where an individual who acquired foreign assets while being a non-resident, and having returned, has omitted to disclose the foreign asset and declare the foreign income, would be permitted to take advantage of the Scheme and pay 30% tax of the value of the foreign asset + 30% tax on undisclosed foreign income if the value of undisclosed foreign asset and income does not exceed Rs 1 cr  and a fee of Rs 1 lakh if the value of foreign assets does not exceed Rs 5 cr. This will be huge relief to a situation which may arise inadvertently.
• Conditions for prosecution under Black Money Act is relaxed such that the penalty provisions of ss. 49 and 50 of the BMA will not be invoked in case of foreign assets other than immovable property if the value does not exceed Rs 20 lakh (doubled the amount)
• Several of the defaults under the income tax law are now decriminalised and penalties rationalised.
• MAT is reduced from 15% to 14% with a major change that for companies opting for old regime of tax, MAT credit will cease to be carried forward, and the outstanding MAT will be treated as final tax. But if companies move to new regime, the MAT credit will be available to be adjusted over next 15 years, never exceeding 25% of the tax liability in a single year.
• There will be no MAT in case of taxpayers falling under presumptive taxation regime
• Tax holiday for IFSC units is now extended to 20 years from 10 years in a block of 15 year.
• A major overhaul in case of ease of dealing with transfer pricing in case of enlarged sector of Information Technology Services, the safe harbour margin rate is reduced to 15% and the threshold turnover for opting for safe harbour is enhanced to Rs. 300 cr
• Capital gains tax exemption for sale of all series of Sovereign Gold Bonds if held through the life of the issuance of the SGBs
• TCS for foreign Tour packages and for education loan remittance reduced from 5% (& 20%) to 2% without any limit within the LRS limit. However, the high and unfair 20% TCS for other payments over 10 lakh Rs continues.

While these procedural changes and tweaks will go a long way in easing tax compliance, one is disappointed that some of the outstanding issues in respect of  taxation of non-residents have not been addressed. These pertain to granting of treaty benefits under bi lateral tax treaties and removing tax uncertainty for non-resident investors. For attracting large foreign investments and achieving Viksit Bharat by 2047, these issues need to be addressed on war footing. The government needs to draw a balance between plugging perceived tax leakage and making investment into India attractive by providing gains appreciation and tax certainty. The devaluation of rupee largely triggered by FPIs pulling out, though not necessarily attributed to these issues, does indeed point to the need for giving better signals for welcoming and inviting FDI as well as portfolio investments.

The Union Budget 2026–27 sets out a youth-focused, growth-oriented agenda, with a clear emphasis on accelerating economic expansion, strengthening capabilities, and deepening inclusive development. Its strong focus on manufacturing, MSMEs, semiconductors, and Rare Earth Corridors highlights a decisive move toward strategic self-reliance. Measures such as the ₹10,000 crore SME Growth Fund and the ₹12.2 lakh crore capex allocation reinforce long-term growth priorities, while major infrastructure commitments—including freight corridors, waterways, high-speed rail, and City Economic Regions—are positioned to act as meaningful economic multipliers.

On taxation, the transition to the Income-tax Act, 2025 marks a significant structural reform. Reduced TCS rates on overseas tour packages and LRS for education/medical is a welcome move and would bring much required relief to individuals. The rationalised penalty framework, expanded safe‑harbour limits for IT services, the extended tax holiday for foreign cloud providers, and the amendments to the buyback tax regime are all welcome reforms that reflect a positive move by the Government towards strengthening confidence of the taxpayers. Extending the tax holiday for GIFT City–IFSC units to 20 years (within a 25‑year window) is a significant boost that will further strengthen the GIFT City-IFSC units long‑term attractiveness and competitiveness.

Corporate tax rates remain unchanged; however, the reduction of MAT to 14% and the discontinuation of future MAT credit accumulation indicate a clear policy direction of the Government which is aimed at encouraging taxpayers to transition to the new tax regime.

Some important expectations, however, remain unaddressed—tax neutrality for fast‑track demergers, inclusion of capital gains within the Section 87A rebate, reduction in STT, clarity on family investment funds in GIFT City, and guidance on grandfathering the concluded assessments following the impact of Supreme Court’s ruling in case of Tiger Global. Greater clarity on these matters would have enhanced certainty for taxpayers and investors.

Overall, the Budget offers a balanced and forward-looking reform agenda with a strong focus on fiscal discipline.

"The Budget 2026 tax proposals reflect Govt.’s intent to support the India Inc. navigating the prevailing geo-political uncertainty and the trade complexities. Clearly, the Govt. roots its position on adding manufacturing capacities and attracting foreign investors committing to patient capital in India. Broadbasing the Safe Harbour eligibility, tax holiday to foreign companies providing cloud services through India-based data centre, foreign company supplying capital goods, equipments to Indian toll manufacturer and steps such as the reduction in TCS rates on specified foreign remittances, extension of the due date to file revised tax returns after payment of a nominal fee, and a simplified TDS deposit mechanism on the sale of immovable property by non-residents are welcome steps. The mandatory pre-deposit for stay of demand during the first-appeal process is reduced to 10% of the disputed core tax amount eases cash flow impact for taxpayers facing significant demands. No breather on personal tax and capital gains tax front as against the expectations. The Govt. continue to focus on encouraging voluntary compliance such as – a one-time Foreign Assets Disclosure Scheme.

Overall budget 2026 encourages India as a long-term destination for toll manufacturers engaged in electronics goods manufacturing; replicate what Apple did with the Chinese economy, aspire to be the world’s GCC hub with a more acceptable safe harbour and support jobs creation in sectors such as textiles, tourism, content creation. That the speech did not elaborate on currency risks, investor sentiment and give the mechanics of how india would generate Net FDI and didn’t afford relief on capital gains regime didn’t cheer the market."

Budget 2026: Government’s focus on Stability and Assurance

"The Finance Minister’s Budget 2026 speech stood out not for big-ticket tax cuts, but for the direction it clearly signals. In a world facing economic uncertainty, disrupted trade flows and shifting geo-political equations, the choice to focus on stability, predictability and long-term reform feels both timely and assuring.

The above approach is visible across several Budget measures—deferred duty mechanisms, simpler TDS and TCS provisions, reduced penal exposure, stronger dispute-prevention frameworks, and targeted support for manufacturing, MSMEs, services and global investors. The message is fairly clear: the next phase of growth will rely less on lowering tax rates and more on building certainty, improving systems and making compliance easier. The steps taken to enhance tax certainty for foreign investors—such as expanded safe harbour rules, faster APAs, and long-term incentives for data centres—are particularly encouraging in this context.

A major milestone is the enactment of the New Income-tax Act, 2025, which replaces the six-decade-old law w.e.f 1 April 2026. While this is a long-awaited reform aimed at simplification and clarity, some transition challenges are inevitable. Much will depend on how quickly rules, forms and systems are rolled out and how prepared the administration is. It is also important to remember that the old law will continue to apply for past years, appeals and ongoing proceedings, meaning taxpayers and professionals will need to work with two parallel regimes for some time.

Another notable reform is the introduction of a one-time foreign income and asset disclosure window for small taxpayers, alongside expanded immunity provisions for lower-value foreign asset non-disclosures. This reflects a calibrated approach—encouraging voluntary compliance and clean-up of legacy issues without creating a perpetual amnesty regime. If implemented with clarity and safeguards, this measure could help taxpayers regularise past omissions while reducing prolonged litigation under the Black Money law framework.

"The Union Budget 2026–27 reflects a deliberate shift in India’s indirect tax and regulatory strategy, from isolated tax interventions towards building an integrated trade and compliance ecosystem. The emphasis is on reducing structural frictions that limit India’s participation in global supply chains. A major highlight of the Budget is the rationalisation of Basic Customs Duty (BCD) across strategic sectors. Basic customs duty has been extended to lithium-ion battery cells, solar glass, and on capital goods required for critical mineral processing. Extension of exemption on imports of goods required for nuclear power projects has been extended till 2035 and expanded to all nuclear plants irrespective of capacity. By lowering Customs duty in technology and energy intensive sectors, the Government signals its intent to deepen integration with global value chains while reducing long-term import dependence.

Removal of the ₹10 lakh cap on courier exports will ease access to global markets, particularly benefiting MSMEs. Exemption from customs duty has been provided on 17 drugs used in cancer treatment, as well as on medicines, drugs etc in seven other diseases for personal importation.

Digitisation remains a cornerstone of indirect tax reform, with the proposal for a single, interconnected digital window for cargo clearances and the rollout of the Customs Integrated System (CIS) over the next two years. As a one-time measure to support SEZ manufacturing units amid global trade disruptions, eligible units will be allowed sales to the DTA at concessional duty rates, up to a prescribed proportion of exports, with safeguards to ensure a level playing field. To further ease compliance, the duty deferment period for authorised economic operators and eligible manufacturers has been extended from 15 days to 30 days, and the validity of advance rulings has been increased from 3 years to 5 years, providing greater certainty and flexibility for trade operations.

The Union Budget 2026–27 paves way for changes announced in GST Council meeting by making amendment in the GST regulations. Such amendments will simplify GST compliance and improve refund processes. One such change is that post-sale discounts will no longer need to be linked to the agreements between supplier and recipient and the same will be allowed if the recipients reverse input tax credit basis the credit note issued by the suppliers. The other change is that provisional refunds will also cover cases arising from inverted duty structures.  Further, the threshold for refund claims on exported goods has been removed, allowing refunds below ₹1,000, which will support MSMEs.  Additionally, the place of supply for intermediary services will follow the default rules under the IGST regulations.

All the announcements made by the Government in the Budget, coupled with the procedural changes announced supporting the ease of doing business, exemptions announced supporting make in India; will usher India in becoming a more attractive destination for the companies to set up their shop here."

"Some far-reaching changes are proposed through the finance bill this year. The tax holiday for Offshore Banking Units / IFSC units is extended from 10 years to 20 consecutive years. This certainly enhances long-term profitability and makes IFSC-based treasury and lending operations more attractive and provides tax stability for foreign banks operating in IFSC, improving global competitiveness.

The proposal to disallow any deduction against dividend income and income from mutual fund units will make Banks/NBFCs with large treasury books face higher taxable income and increases effective tax cost for corporate investors in MFs.

This incidentally impacts the entire mutual fund industry as well as because it reduces post-tax returns of schemes with dividend-yield strategies, which may push AMCs shift its sales effort towards growth-oriented fund structures.

STT on transactions in futures is proposed to be increased from 0.02% to 0.05%, and on options from 0.1% to 0.15% on sale premium and 0.125% to 0.15% on exercise intrinsic value.  This clearly means higher trading cost for arbitrage, hedge and derivative-based schemes and it could reduce liquidity in MF-run F&O strategies. Potential reduction in retail derivatives participation aligns with intent to curb “disproportionate speculation”

One major change impacting foreign private equity investors is the by-back of shares by their investee companies. Currently buybacks are taxed as dividend income and non-resident shareholders pay tax of 20% without the benefit of corresponding tax credits in their home countries. The proposed changes to tax buyback as capital gains makes buyback more tax efficient."