The Union Budget 2026 has delivered one of its most consequential tax interventions by sharply expanding safe harbour rules, a move tax experts said will materially reduce transfer pricing disputes and long-running litigation for information technology companies, global capability centres and multinational corporations operating in India.
Experts said the increase in eligibility thresholds, standardisation of margins and shift towards automated approvals mark a clear move away from discretionary assessments to rule-based tax certainty, directly impacting compliance costs and dispute exposure for businesses.
Threshold expansion and margin certainty drive impact
Sunil Arora, National Head of Taxation at ASA and Associates, said the expansion of safe harbour thresholds significantly alters the transfer pricing landscape.
“The expansion of safe harbour thresholds from 300 crore rupees to 2,000 crore rupees, consolidation of software development, ITES, KPO and research and development services into a single IT services category, and adoption of a uniform margin of 15.5 percent will substantially narrow the scope for transfer pricing controversy,” Arora said.
He added that automated approvals and faster unilateral advance pricing agreements would further reduce dispute timelines for IT companies and global capability centres.
Litigation reduction becomes explicit policy goal
Rajat Mohan, Senior Partner at AMRG and Associates, said the safe harbour push reflects a deliberate policy choice to de-risk tax outcomes.
“Expanding safe harbour rules and standardising margins signal a decisive shift towards litigation reduction and certainty,” Mohan said. “For businesses, this improves predictability and reduces prolonged disputes that tie up capital and management bandwidth.”
Mohan added that aligning tax computation closer to commercial accounting practices would further reduce interpretational conflicts over time.
Foreign investors and data centres gain clarity
Aravind Srivatsan, Partner and India Tax Leader at Nangia Global, said the measures strengthen India’s positioning for long-term foreign investment.
“Broadbasing safe harbour eligibility, including for data centres, and extending tax holidays to foreign companies providing cloud services through India-based facilities improve certainty for investors committing patient capital,” Srivatsan said.
He added that lowering tax dispute risk is critical for attracting multinational manufacturing and digital infrastructure investments.
Move away from discretionary assessments
Zubin Billimoria, President of the Bombay Chartered Accountants Society, said the safe harbour expansion addresses a persistent source of corporate litigation.
“Expanded safe harbour regulations reduce discretion in assessments and minimise routine disputes,” Billimoria said. “This directly supports compliance ease and dispute prevention for corporate taxpayers.”
Certainty over tax rate cuts
Rajan Sachdev, Partner at Nangia Global, said the emphasis on safe harbour underscores the Budget’s preference for predictability over headline tax reductions.
“The focus is on building confidence through certainty and system reforms rather than rate cuts,” Sachdev said.
Trust-based framework reinforced
Sneha Padhiar, Partner Direct Tax at Bhuta Shah and Co, said standardisation and automation within safe harbour approvals reinforce trust-based tax administration.
“Uniform margins and automated processes reduce administrative discretion and compliance friction,” Padhiar said. “This enhances taxpayer confidence and encourages voluntary compliance.”
Experts said the expanded safe harbour regime stands out as one of Budget 2026’s most impactful tax measures, with the potential to significantly lower disputes, improve ease of doing business and strengthen India’s appeal as a base for technology and multinational operations.
