India's Lok Sabha has approved the Finance Bill 2026 on 25 March 2026, implementing the Union Budget 2026–27's wide-ranging tax reforms — including a reduced minimum alternate tax rate, transfer pricing safe harbour changes, and new incentives for the IT sector and strategic industries — as the bill awaits Rajya Sabha approval before the new Income Tax Act takes effect on 1 April 2026.
India’s Lok Sabha (lower house of parliament) has approved the Finance Bill 2026 with amendments on 25 March 2026. It now awaits approval by the Rajya Sabha. The bill implements the Union Budget 2026–27, including measures to introduce the new Income Tax Act 2025 from 1 April 2026.
The Union Budget 2026–27 includes proposals centred on simplifying taxation for multinationals and bringing greater certainty to cross-border transactions. Key measures include reforms to the safe harbour regime for transfer pricing, to be implemented through the New Income Tax Act 2025. The budget also targets strategic industries with major investments in biopharma and semiconductors, expands infrastructure through new high-speed rail corridors, and supports domestic manufacturing via customs duty exemptions.
The key measures are:
Corporate tax
The minimum alternate tax rate is cut from 15% to 14% and reclassified as a final tax, while share buybacks are now taxed as capital gains.
IT sector safe harbour
The budget consolidates software development, ITES, KPO, and contract R&D into one unified “Information Technology Services” category, replacing fragmented classifications with a single 15.5% safe-harbour margin. The eligibility threshold is raised sharply from INR 300 crore to INR 2,000 crore, bringing a much larger portion of the tech industry under its scope.
Other incentives include:
- Tax holidays
- Foreign cloud service providers using Indian data centres receive a 20-year tax holiday (or until 2047).
- Non-residents supplying equipment to toll manufacturers in bonded zones get a 5-year income tax exemption.
- Data centre incentives: Resident entities providing data centre services to related foreign companies benefit from a 15% cost safe harbour.
- Electronics logistics: To support just-in-time electronics manufacturing, non-resident warehousing components in bonded zones are covered by a 2% profit margin safe harbour, translating to an effective tax of roughly 0.7%.
- Faster dispute resolution: Unilateral Advance Pricing Agreements (APAs) are targeted for conclusion within two years. The ability to file modified returns under APAs has also been extended to associated entities, broadening procedural relief.
Securities
The securities transaction tax (STT) on futures rises sharply from 0.02% to 0.05%, while the punitive rate on unexplained credits and investments is halved to 30%.
Indirect taxes
Import tariffs on personal goods are halved, customs duties are waived on essential medicines and rare disease treatments, and exemptions are extended to support the battery and solar energy industries.
Foreign asset disclosure
The new FAST-DS 2026 scheme offers taxpayers a path to declare undisclosed overseas assets up to INR 10 million by paying a combined 60% tax and penalty, with prosecution immunity.
Personal tax
The tax collected at source (TCS) rates on overseas remittances for travel, education, and healthcare are cut to a flat 2%, tax return deadlines are staggered across filer categories, and the window to revise returns is extended to 31 March.
Earlier, India’s Finance Minister Nirmala Sitharaman presented the Union Budget 2026–27 on 1 February 2026.
