Union Budget 2026: Government Brings IT Services Under Single Category, Boosts Tax Certainty

Union Finance Minister Nirmala Sitharaman on Sunday highlighted India's position as a global leader in software development services, IT-enabled services, knowledge process outsourcing and contract research and development. Presenting the Union Budget 2026-27 in Parliament on Sunday, Sitharaman announced that these segments will be brought under a single category named “Information Technology Services.”

"India is recognised as a global leader in software development services, IT-enabled services, knowledge process outsourcing, and contract R&D services. All these segments to be clubbed under a single category called Information Technology Services," Sitharaman said.

She further announced a common safe harbour margin of 15.5 per cent for all IT services. The threshold for availing the safe harbour provision will be increased from Rs 300 crore to Rs 2,000 crore.

"A common safe harbour margin of 15.5 per cent will apply to all IT services. Threshold for availing safe harbour increased from ₹300 crore to ₹2,000 crore. Safe harbour approvals for IT services will be processed via an automated, rule-driven system, removing the need for examination by tax officers," she said.

The Union Budget also introduced measures to support IT services and attract global investment. For companies opting for Advanced Pricing Agreements (APA), the processing time will be reduced to two years, with a possible six-month extension. The facility of modified returns will also be extended to associated entities entering into an APA.

To promote investment in digital infrastructure, Sitharaman announced a tax holiday until 2047 for foreign companies providing cloud services globally using data centres located in India.

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