DBT Bureau
Pune, 1 Feb 2026
The Union Budget has proposed a tax holiday extending until 2047 for foreign companies that provide cloud services to global customers using data centres located in India, a move aimed at positioning the country as a major global hub for cloud infrastructure, boosting investments in data centres and strengthening India’s role in the digital economy.
The Union Budget 2026–27 lays out a simplified and growth-oriented tax framework for India’s IT sector by consolidating software development, IT-enabled services, KPO and contract R&D into a single category of Information Technology Services with a uniform safe harbour margin of 15.5%. To widen participation, the eligibility threshold for availing safe harbour has been sharply raised from ₹300 crore to ₹2,000 crore, while approvals will now be granted through an automated, rule-based system without tax officer intervention, allowing companies to opt for the regime for up to five consecutive years. In parallel, IT services firms seeking pricing certainty have been offered a fast-track unilateral Advance Pricing Agreement route, targeted for completion within two years—extendable by six months—along with extended access to modified return filings for transactions with associated entities.
