The Union Budget 2026–27, presented by Nirmala Sitharaman, introduces major reforms to simplify transfer pricing compliance for the IT sector. Recognising India’s leadership in software development, IT-enabled services, knowledge process outsourcing, and contract R&D services, the Budget proposes to club all these activities under a single category of “Information Technology Services” with a uniform safe harbour margin of 15.5%. A key reform is the substantial increase in the turnover threshold for availing the safe harbour regime from ₹300 crore to ₹2,000 crore, significantly expanding its coverage. Further, approval of safe harbour applications will now be done through an automated, rule-driven process, eliminating the need for examination or acceptance by tax officers. Once opted, the safe harbour can be continued for five consecutive years. For companies preferring Advance Pricing Agreements, a fast-track unilateral APA mechanism is proposed, targeted to be concluded within two years, extendable by six months, along with continued access to modified return filing benefits.
Ministry of Finance
THE THRESHOLD FOR AVAILING SAFE HARBOUR FOR IT SERVICES ENHANCED FROM RS 300 CRORE TO Rs 2000 CRORE
SAFE HARBOUR FOR IT SERVICES SHALL BE APPROVED BY AN AUTOMATED RULE-DRIVEN PROCESS
Posted On: 01 FEB 2026
The Union Minister of Finance and Corporate Affairs, Smt Nirmala Sitharaman presented the Union Budget 2026-2027 in the Parliament today.
Presenting the Budget, the Finance Minister said that 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. These business segments are quite inter-connected with each other. 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 threshold for availing safe harbour for IT services has been enhanced substantially from 300 crore rupees to 2,000 crore rupees in the Union Budget 2026-27.
The Finance Minister further said that Safe harbour for IT services shall be approved by an automated rule-driven process without any need for tax officer to examine and accept the application. Once applied by an IT Services company, the same safe harbour can be continued for a period of 5 years at a stretch at its choice.
For IT services companies who want to conclude Advance Pricing Agreement (APA), the Finance Minister announced fast track Unilateral APA process for IT services and endeavour to conclude it within a period of 2 years. The period of 2 years can be extended by a further period of 6 months on taxpayer’s request. The facility of modified returns available to the entity entering APA to its associated entities is also extended.
