Executive Overview
India’s Union Budget 2026–27, presented on 1 February 2026, places strong emphasis on investment promotion, ease of doing business, global integration, and long-term competitiveness, with strategic reforms aimed at positioning India as a compelling destination for foreign capital, global digital services, manufacturing linkages, financial services, and equity market participation.
Implementation ofthe New Income Tax Act, 2025 (Effective 1 April 2026)
- The Income-tax Act, 2025 is a comprehensive overhaul of India’s direct tax framework, replacing the Income-tax Act, 1961. It aims to simplify and modernise tax rules, procedures, and compliance
Key Features
- Introduction of a unified Tax Year concept replacing the “assessment year / previous year” system, thereby streamlining income taxation.
- Reduction in the number of sections with clearer language to minimise ambiguity and litigation.
- Strong emphasis on digital filing and faceless assessments to reduce human interface and disputes.
- Faster processing of refunds and greater clarity on deductions such as standard deduction, house property interest, and pre-construction interest.
What this means: Easier compliance for taxpayers, fewer disputes, and faster processing of assessments and refunds.
Rationalisation of Tax & Investment Incentives
20-Year Tax Holiday for IFSC & DataDriven Services
- Businesses establishing operations in GIFT City are eligible for a 20-year tax holiday (earlier 10 years), followed by a 15% flat corporate tax rate.
- Foreign cloud and global digital service providers using India-based data centres are granted income tax exemption until 2047 on income derived from such services.
- A safe harbour margin of 15% on cost applies where the resident data centre provider is a related entity.
Tax-free toll manufacturing for electronics
- Foreign companies supplying capital goods, equipment, or tooling to Indian contract manufacturers through customs-bonded warehouses are eligible for income tax exemption until 31 March 2031, subject to prescribed conditions.
- Impact: Enhanced tax certainty and major cost savings for international finance, technology, and digital services firms planning India-centric operations.
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