The proposals within the Union Funds of 2026-27 on protected harbour margin and advance value mechanism have been welcomed by the know-how business in India, and that is anticipated to spice up the prospects of worldwide functionality centres (GCCs) working within the nation.
The Funds has now proposed clubbing software program improvement providers, IT-enabled providers, information course of outsourcing providers and contract R&D providers regarding software program improvement beneath a single class, Info Expertise Providers, with a standard protected harbour margin of 15.5% relevant to all.
“The edge for availing protected harbour for IT providers is being enhanced considerably from 300 crore rupees to 2,000 crore rupees. Protected harbour for IT providers shall be accredited by an automatic rule-driven course of with none want for a tax officer to look at and settle for the appliance. As soon as utilized by an IT Providers firm, the identical protected harbour will be continued for a interval of 5 years at a stretch at its alternative,” Union Finance Minister Nirmala Sitharaman stated in her Funds speech.
This has been a long-standing demand from the Indian know-how business, which has led to frequent disputes with the Revenue Tax division.
In its response to the Union Funds, Nasscom stated, “…represents a decisive shift away from process-heavy compliance in the direction of readability, predictability and trust-based governance. This will considerably cut back recurring switch pricing friction for GCCs in addition to for different Indian IT and ITES suppliers working eligible related-party preparations.”
Given the robust presence of overseas know-how firms in India, the brand new laws present much-needed reduction.
Nasscom Chairperson Sindhu Gangadharan stated, “Better predictability in tax and compliance frameworks is important when know-how platforms are designed to run for years. For giant, globally distributed engineering and operations groups, readability reduces friction in decision-making and permits accountability for core platforms and merchandise to sit down firmly in a single place. This issues for GCCs which can be transferring into full-stack possession, the place India more and more builds, runs, and scales enterprise platforms for international prospects.”
The GCCs are actually spearheading development for the Indian know-how business, and international firms are more and more trying to arrange centres in India.
Bhartiya Converge CEO Monica Pirgal stated, “The federal government has eliminated the core friction factors that international enterprises confronted whereas increasing in India. Additionally, this indicators a strong shift that scale is not penalised however actively inspired.”
The understanding in tax laws is wholeheartedly welcomed by the know-how business, and for GCCs, this removes any doubts when they’re scaling their enterprise.
InCommon co-founder & CEO Piyush Kedia stated, “For mid-market and PE-backed firms, that is significant as a result of it lowers friction to begin small, construct confidently, and scale a GCC as a core a part of the working plan.”
Meyyappan Nagappan, Accomplice- Tax Apply, Trilegal, stated, “The Union Funds 2026 reinforces India’s attractiveness as a hub for international functionality centres and IT providers. “
The Funds additionally proposed sure modifications within the Advance Pricing Settlement (APA) for IT providers firms, with the endeavour to conclude it inside a interval of two years, which has additionally been welcomed by the business.
Nasscom stated, “From an business perspective, it is a sensible step in the direction of lowering friction, enhancing useful resource allocation throughout the tax system, and strengthening the credibility of India’s tax certainty framework at scale.”
Wipro CFO Aparna Iyer stated, “The proposals resembling combining IT providers and R&D Providers right into a single bucket, rising the brink restrict for protected harbor and offering a 2-year timeline for conclusion of unilateral APAs will present tax certainty and cut back the price of compliance for firms working within the sector.”
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