Budget Quote from Himanshu Sinha, Partner – Tax Practice, Trilegal
“The Union Budget 2026 continues the government’s emphasis on growth, employment generation, and improving compliance through greater ease of doing business.
A standout initiative aimed at promoting the AI ecosystem is the introduction of a tax holiday until 2047 for foreign companies providing cloud services to global customers using data centre infrastructure located in India.
On the corporate tax front, the Budget rationalises the taxation of share buybacks by reclassifying them from dividend income to capital gains. However, the introduction of three retrospective procedural amendments raises concerns around certainty and fairness in tax administration.
In transfer pricing, a uniform safe harbour arm’s length rate of 15.5% has been proposed for IT services and the applicability threshold has been substantially increased from ₹300 to ₹2,000 crore – this would increase its adoption.
Procedural reforms relating to tax return filing, assessment processes, and the decriminalisation of minor offences are targeted to reduce litigation and foster a non-adversarial tax regime.
That said, the significant increase in Securities Transaction Tax on futures and options may adversely impact market depth and liquidity.
On the indirect tax side, proposed GST amendments such as liberalising post-sale discount conditions, aligning place-of-supply rules for intermediary services, and expanding provisional refunds to include inverted duty structures are very positive. The extension of validity of customs advance rulings to five years, along with tariff rationalisation in key sectors like critical minerals, renewable and nuclear energy, aviation and pharma should support manufacturing and exports.”
Author
Himanshu Sinha, Partner – Tax Practice, Trilegal
