Union Budget: Govt Brings IT Services Under Single Category
Sitharaman also said that safe harbour approvals for IT services will now be processed through an automated, rule-based system
New Delhi: Union Finance Minister Nirmala Sitharaman on Sunday highlighted India’s emergence as a global leader in software development services, IT-enabled services, knowledge process outsourcing and contract research and development.
Presenting the Union Budget 2026–27 in Parliament, Sitharaman announced that these segments will be brought under a single category called “Information Technology Services.” She said the move would streamline the classification of IT-related activities and provide greater clarity to the industry.
“India is recognised as a global leader in software development services, IT-enabled services, knowledge process outsourcing, and contract R&D services. All these segments will be clubbed under a single category called Information Technology Services,” the finance minister said.
She further announced the introduction of a common safe harbour margin of 15.5 per cent for all IT services. In addition, the threshold for availing the safe harbour provision will be increased significantly from ₹300 crore to ₹2,000 crore.
Sitharaman also said that safe harbour approvals for IT services will now be processed through an automated, rule-based system, eliminating the need for examination by tax officers and reducing compliance burdens.
The Union Budget also unveiled measures aimed at supporting IT services and attracting global investment. For companies opting for Advanced Pricing Agreements (APA), the processing time will be reduced to two years, with a possible extension of six months. The facility of filing modified returns will also be extended to associated entities entering into an APA.
To boost investment in digital infrastructure, the finance minister announced a tax holiday until 2047 for foreign companies providing global cloud services using data centres located in India.
