“India is a global leader in software development services. IT-enabled services, knowledge process outsourcing services, and contract R&D services relating to software development are quite interconnected. All these services are proposed to be clubbed under a single category, Information Technology Services, with a common safe harbour margin of 15.5 percent applicable to all,” the Finance Minister announced during the Budget.
The threshold for availing safe harbour for IT services is being enhanced from ₹300 crore to ₹2,000 crore. Alongside, the safe harbour for IT services shall be approved by an automated rule-driven process without any need for a tax officer to examine and accept the application. Once applied by an IT Services company, the same safe harbour can be continued for five years at a stretch.
For IT services companies that want to conclude an Advance Pricing Agreement (APA), the Finance Minister proposed to fast-track the Unilateral APA process and endeavour to conclude it within a period of 2 years. This period can be extended by a further period of 6 months on the taxpayer’s request.
IT Industry body Nasscom noted that a major positive for the technology industry is the rationalisation of the international taxation and transfer pricing framework, and the clear use of tax policy as a competitiveness lever. It added that the consolidation of the business segments with a uniform safe harbour margin of 15.5 percent, together with the enhancement, expands access to certainty mechanisms for routine cross-border IT service models.
“The proposal to move Safe Harbour approvals to an automated, rule-driven process without examination by tax officers, along with the option to apply the same Safe Harbour for a continuous five-year period, represents a decisive shift away from process-heavy compliance towards clarity, predictability, and trust-based governance. This can significantly reduce recurring transfer pricing friction for GCCs as well as for other Indian IT and ITES providers operating eligible related-party arrangements,” it said.
The Budget’s proposal to fast-track unilateral APAs for IT services addresses long-standing concerns around timelines and access to certainty.
“The extension of the modified return facility to associated entities where income changes arise due to an APA is particularly relevant, as it supports smoother implementation of group-level outcomes and reduces the risk of residual disputes. Read alongside the expanded and automated Safe Harbour framework, these changes introduce a clearer tiering of certainty mechanisms, allowing routine cases to move onto rule-based tracks while enabling APAs, including renewals, to focus on genuinely complex matters. From an industry perspective, this is a practical step towards reducing friction, improving resource allocation within the tax system, and strengthening the credibility of India’s tax certainty framework at scale,” Nasscom added.
Wipro CFO Aparna Iyer commented that the budget articulates the government’s vision to promote the Indian IT services sector as a primary driver of India’s economic growth, leveraging AI as a force multiplier.
“Proposals such as combining IT services and R&D Services into a single bucket, increasing the threshold limit for safe harbor, and providing a 2-year timeline for conclusion of unilateral APAs will provide tax certainty and reduce the cost of compliance for companies operating in the sector. We also welcome the government’s initiatives to improve ease of doing business, as these reforms will support enterprises across sectors by alleviating operational challenges and boosting India’s economic growth momentum,” she said.
Piyush Jha, Group Vice President & Head – APAC at GlobalLogic, highlighted that at a time when global macro headwinds are reshaping tech spending, the Budget brings certainty for India’s IT services and GCC ecosystem. The unified IT services safe harbour framework with a predictable 15.5 per cent margin, along with faster closure of advance pricing agreements, strengthens ease of doing business and reinforces India’s competitiveness as a global delivery and engineering hub.
Published on February 1, 2026
