THEBUSINESSBYTES BUREAU

NEW DELHI, FEBRUARY 1, 2026

The Union Budget 2026-27 has laid out an ambitious and forward-looking roadmap to accelerate India’s electronics and information technology sectors, with a strong thrust on semiconductor self-reliance, manufacturing expansion and long-awaited tax certainty for IT and ITeS companies. Presenting the Budget in Parliament, Finance Minister Nirmala Sitharaman announced a series of measures aimed at strengthening India’s position as a global technology and digital services powerhouse.

A major highlight of the Budget is the launch of India Semiconductor Mission (ISM) 2.0, which will build on the foundation laid by ISM 1.0 and focus on developing semiconductor equipment and materials, designing full-stack Indian intellectual property, and reinforcing resilient supply chains. Emphasising an industry-led approach, ISM 2.0 will promote advanced research and specialised training centres to nurture cutting-edge technologies and a skilled workforce. An allocation of ₹1,000 crore has been earmarked for the mission in FY 2026–27, signalling the government’s sustained commitment to the strategic sector.

Riding on strong investor confidence, the Budget also proposes a substantial increase in the outlay for the Electronics Components Manufacturing Scheme to ₹40,000 crore. Launched in April 2025, the scheme has already attracted investment commitments exceeding twice its initial target, underlining India’s growing attractiveness as an electronics manufacturing hub.

In a significant relief for the IT and ITeS industry, the Budget introduces reformed safe harbour provisions to ensure greater tax certainty. Software development, IT-enabled services, knowledge process outsourcing and contract R&D will now be classified under a single category of ‘Information Technology Services’, with a uniform safe harbour margin of 15.5 per cent. The eligibility threshold has been raised sharply to ₹2,000 crore, while the approval process will be fully automated and rule-based, allowing companies to opt in for up to five consecutive years.

To further streamline dispute resolution, the Budget proposes fast-tracking unilateral Advance Pricing Agreements for IT services, with an endeavour to conclude cases within two years. Modified return facilities will also be extended to associated enterprises entering into APAs.

Recognising data centres as critical digital infrastructure, the Budget offers a tax holiday until 2047 for foreign cloud service providers using data centres located in India, subject to serving Indian customers through Indian reseller entities. Additionally, a safe harbour margin of 15 per cent on cost has been proposed for related-party data centre services.

The Budget also announces the formation of a high-powered ‘Education to Employment and Enterprise’ Standing Committee to assess the impact of emerging technologies such as artificial intelligence on jobs and skills, reinforcing the services sector as a key pillar of the Viksit Bharat vision.