FM brings IT services under single category in Union Budget: What this means for IT companies

Union Budget 2026 recognises the Indian IT assemblage arsenic 1 of the cardinal maturation drivers for the country's economy. Union Finance Minister Nirmala Sitharaman projected a azygous class for companies offering IT services successful the country.

Highlighting India's presumption arsenic a planetary person successful bundle improvement services, IT-enabled services, Knowledge Process Outsourcing (KPOs) and declaration probe and improvement (R&D); FM suggested bringing each nether the class named 'Information Technology Services'.

"India is recognised arsenic a planetary person successful bundle improvement services, IT-enabled services, cognition process outsourcing, and declaration R&D services.

All these segments to beryllium clubbed nether a azygous class called Information Technology Services," Sitharaman said. This means that companies offering each these services volition beryllium clubbed nether a azygous category, Information Technology Services, with a communal harmless harbour borderline of 15.5%.The Finance Minister further said that Safe harbour for IT services shall beryllium approved by an automated rule-driven process without immoderate request for a taxation serviceman to analyse and judge the application.

"A communal harmless harbour borderline of 15.5% volition use to each IT services. The threshold for availing harmless harbour accrued from Rs 300 crore to Rs 2,000 crore. Safe harbour approvals for IT services volition beryllium processed via an automated, rule-driven system, removing the request for introspection by taxation officers," she said.For IT services companies who privation to reason Advance Pricing Agreement (APA), the Finance Minister announced a accelerated way Unilateral APA process for IT services and endeavour to reason it wrong a play of 2 years.

The play of 2 years tin beryllium extended further by a play of 6 months connected taxpayer’s request. The installation of modified returns disposable to the entity entering APA to its associated entities is besides extended.The Union Budget besides introduced measures to enactment IT services and pull planetary investment. For companies opting for Advanced Pricing Agreements (APA), the processing clip volition beryllium reduced to 2 years, with a imaginable six-month extension. The installation of modified returns volition besides beryllium extended to associated entities entering into an APA.