Budget 2026: Safe Harbour margin for IT services set at 15.5%, eligibility raised to ₹2,000 crore

Finance Minister Nirmala Sitharaman on Sunday, February 1, announced a significant overhaul of the transfer‑pricing Safe Harbour regime in her Budget 2026 speech, in a key positive move for India’s IT services sector.

Under the revised framework, the government raised the Safe Harbour eligibility threshold from ₹300 crore to ₹2,000 crore, allowing a much wider set of companies to opt into the simplified transfer pricing regime. The enlarged limit means that mid‑sized and larger Indian IT service providers will now be able to access predetermined tax margins, reducing exposure to detailed audits and disputes.

To further streamline the system, all categories of IT services, including software development, IT enabled services, knowledge process outsourcing and related contract R&D, were brought under a single safe harbour category with a uniform margin of around 15.5 %, replacing the earlier segmented structure.

Industry experts hailed the move as a big positive for the sector. Promod Batra, Partner, Deloitte India said the move "Will reduce litigation significantly. Also, rule based automatic processing of safe harbour approval is a positive step."

Welcoming the move, Tarun Arora, Partner, Deloitte India said, "The changes take into account industry expectations and would help in ease of doing business for IT service companies as they can plan their Transfer Prices with certainty and avoid protracted litigation. This would lead to further growth and expansion of IT service set ups in India and increase their contribution to India’s growth."

The announcement also confirmed that the approval process for Safe Harbour compliance will shift to an automated, rule‑based system, eliminating the need for examination by tax officers and offering further clarity for businesses operating in global markets.