Key Changes in External Commercial Borrowings (ECB) Framework under FEMA

by Pushkar Mer

The Reserve Bank of India (RBI) has notified the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 (Notification No. FEMA 3(R)(5)/2026-RB, dated February 9, 2026, and published in the Official Gazette on February 16, 2026).

Key Highlights of the Amendments

1. Expanded Eligible Borrowers and Recognized Lenders
• Broader inclusion of entities (e.g., any person resident in India except individuals, subject to incorporation/registration under applicable laws).
• Enhanced recognition of foreign lenders to increase funding options.

2. Revised Borrowing Limits
• Eligible borrowers can now raise ECBs up to the higher of:
• USD 1 billion (outstanding ECBs), or
• Total outstanding borrowings (external + domestic) up to 300% of net worth (based on the last audited standalone balance sheet).

3. Removal of Cost of Borrowing Restrictions
• All-in-cost ceilings (previously benchmark + margin) have been removed.
• Pricing is now fully market-driven.
• For refinancing, the earlier requirement of lower cost/credit spread has also been eliminated.

4. Rationalized Minimum Average Maturity Period (MAMP)
• Uniform MAMP of 3 years for most ECBs.
• Manufacturing sector borrowers: MAMP between 1–3 years, subject to outstanding ECB ≤ USD 150 million.
• Longer maturity requirements (e.g., 5/7/10 years in older tracks) have been streamlined or removed.

5. Refinancing Provisions
• Refinancing (full or partial) of existing ECBs by fresh ECB is permitted.
• Safeguard: Refinancing must not result in failure to meet the MAMP requirement applicable to the original borrowing (or weighted outstanding maturity for multiple borrowings).
• This allows flexibility in rollovers while preventing undue shortening of the original maturity profile.

6. Strengthened End-Use Restrictions (New Regulation 3A)
• Detailed prohibitions/restrictions introduced to prevent misuse, including:
• Investment in chit funds, Nidhi companies.
• Real estate business (with limited exceptions, e.g., clarified for land/immovable property in permitted cases).
• Capital market transactions (except certain strategic corporate actions).
• On-lending restrictions in some cases.
• Repayment of certain restricted domestic loans or NPAs.
• End-uses now more tightly monitored for productive purposes.

7. Simplification of Reporting and Compliance
• Streamlined requirements (e.g., updated forms, event-based reporting via ECB-2).
• Enhanced clarity on security creation, conversion to non-debt instruments, corporate actions.

Supreme Court upholds NCLAT order directing NBCC to complete stalled Supertech Housing Projects

by Pushkar Mer

Hon’ble Supreme Court on Thursday upheld the order of the National Company Law Appellate

Tribunal (NCLAT) directing State-owned NBCC to expeditiously complete 16 stalled housing

projects of debt-ridden real estate developer Supertech Limited.

A Bench comprising Chief Justice Surya Kant and Justice Joymalya Bagchi affirmed the NCLAT’s

December 12, 2024 order, which had brought NBCC on record for completion of the projects in

the interest of homebuyers.

This is a great relief for homebuyers.

Refund of Input Tax Credit (‘ITC’)

by Pushkar Mer

In the case of Alstom Transport India Ltd vs. Additional Commissioner, CGST and Central Excise (Appeals) & Ors. (Gujarat High Court, judgment dated January 23, 2026), the Court held that after an amalgamation, the transferor company cannot partially transfer its Input Tax Credit (ITC) to the resulting company via FORM GST ITC-02 while claiming a refund of the remaining balance ITC.

UNION BUDGET 2026-27

by Pushkar Mer

Direct Taxes

The basic tax slabs for individual and HUF remain unchanged in the old and new regime.

Corporate tax rates remain unchanged

MINIMUM ALTERNATE TAX (‘MAT’)

Rate of MAT reduced from 15 to 14 per cent.

  • No credit for tax paid under MAT for domestic companies under old

regime.

  • Accumulated MAT credit available for set-off up to 15 years for

domestic companies under new regime. Utilization restricted to 25

per cent of normal tax liability.

  •  No impact on foreign companies.

INTERNATIONAL TAXATION

  • Tax holiday until 2047 for income earned by a foreign company from providing cloud services using data center services procured from India. Income attributable to Indian customers is also eligible for tax exemption provided such services are routed through an Indian reseller entity.
  •  Income of a foreign company from supply of capital goods, equipment or tooling to an Indian contract manufacturer of electronic goods based in a custom bonded area, eligible for tax exemption for a period of five years.
  • Overseas income of a non-resident individual providing specified services in India under a notified scheme, is exempt from tax for a period of five years.

FOREIGN ASSETS OF SMALL TAXPAYERS DISCLOSURE SCHEME, 2026 (FAST-DS 2026)

TYPE OF ASSETS OR INCOMETAX AMOUNT PAYABLECONDITIONS
No disclosure in tax returnAggregate of the below  30 per cent of FMV of the asset as on March 31, 2026,  30 per cent of undisclosed foreign income as tax, and  100 per cent of the aboveAggregate of undisclosed foreign income and FMV of undisclosed foreign assets ≤ ₹10 million
a. No disclosure in tax return but taxes paid b. No disclosure upon becoming a resident but assets acquired as non-residentFee of ₹0.1 millionFMV of undisclosed foreign assets

IT Sector Tax Incentives Unified Safe Harbour Framework

Software development, IT enabled services, KPO, and contract R&D services clubbed under single category with common 15.5% safe harbour margin. Threshold enhanced from ₹300 crore to ₹2,000 crore. Automated rule-driven approval process with 5-year continuity option.

Cloud Services

Tax holiday till 2047 for foreign cloud service providers using Indian data centres.

Indirect Taxes

Customs Duty Reforms

Personal Imports

Tariff rate on dutiable goods for personal use reduced from 20% to 10%. Basic customs duty exempted on 17 drugs and medicines. Seven more rare diseases added for duty exemption on personal imports.

Export Competitiveness

Duty-free import limit for seafood processing inputs increased from 1% to 3% of FOB value. Duty-free imports extended to leather and synthetic footwear exports. Fish  catch in EEZ made duty-free.

Export Timeline Extension

Export time frame for final products extended from six months to one year for exporters of leather or textile garments, leather or synthetic footwear, and other leather products.

Manufacturing Support

BCD exemption extended for capital goods manufacturing lithium-ion cells. Capital goods for critical minerals processing exempted. Nuclear power project imports exempted till 2035.

Aviation Sector

BCD exempted on components for civilian and training aircraft manufacture. Raw materials for aircraft parts in defence sector MRO exempted from basic customs duty.

SEZ Domestic Sales

One-time measure allowing eligible manufacturing units in special economic zones (SEZs) to sell goods in domestic tariff area at concessional duty rates, addressing underutilization of manufacturing capacity due to global trade disruptions.

Central Goods and Services Tax(CGST) Amendments

The Union Budget 2026-27 introduces several key amendments to the CGST Act, 2017, streamlining processes and providing clarity on various tax aspects.

Section 15: Valuation of Supply

Clarifies that post-supply discounts are permissible for valuation if a credit note is issued by the supplier and the recipient reverses the input tax credit (ITC) attributable to such discount.

Section 34: Credit and Debit Notes

Aligns with the amendment in Section 15, allowing for the issuance of credit notes for post-supply discounts that meet the specified conditions.

Section 54: Refunds

Expands the scope of refund claims to include unutilized input tax credit.

Excludes cases of tax refund on exported goods (with tax payment) from certain sub-sections, streamlining export refunds.

Section 101A: National Appellate Authority (NAA)

Introduces an interim provision allowing the Government to empower existing authorities to hear appeals under Section 101B until the NAA is constituted. This ensures continuity in the appellate process.

Disclaimer

All information presented in this document is based on announcements made by the Finance Minister during the Union Budget 2026-27 speech. The applicability and enforceability of these provisions will come into effect only upon their official publication through notifications under the relevant Acts and Laws.

China’s historic $1.2 Trillion Trade Surplus

by Pushkar Mer

China reported a record trade surplus of nearly $1.2 trillion in 2025, led by booming exports to non-US markets as producers ​looked to build global scale to fend off sustained pressure from the US. A push by policymakers for Chinese firms to diversify beyond the world’s top consumer market by shifting ‌focus to Southeast Asia, Africa and Latin America paid dividends, cushioning the economy against US tariffs and geopolitical frictions.

Revised DIR-3 KYC Norms

by Pushkar Mer

The Ministry of Corporate Affairs (MCA) has notified a significant compliance relief for all the DIN Holders by amending existing DIR-3 KYC requirements under the Companies Act, 2013 vide its notification dated December 31, 2025. The amendment of Rule 12A of the Companies (Appointment and Qualification of Directors) Amendment Rules, 2025, will come into effect from March 31, 2026.

Key Highlights of the Amendment

1.       TRIENNIAL FILING

·       Earlier, every DIN holder was required to file DIR-3 KYC annually, even if no changes occurred. Under the revised framework, DIR-3 KYC will now be filed once every three consecutive financial years.

·       The form must be submitted on or before June 30 following the completion of the three years, provided the DIN remains valid.

 2.       SINGLE WEB-BASED FILING SYSTEM

The MCA has streamlined the process by mandating DIR-3 KYC Web as the only mode of filing, removing the earlier distinction between e-forms and web-based filings.

 3.       MANDATORY UPDATES ON CHANGE IN PERSONAL DETAILS

Despite reduced filing frequency, directors must update their details within 30 days of any change in:

  • Mobile number
  • Email address
  • Residential address

Such updates must be digitally signed by the director and certified by a practising CS, CA or CMA.

4. TRANSITIONAL PROVISIONS

  • Directors who completed DIR-3 KYC before April 1, 2026, will automatically move to the triennial cycle.

Example: If DIR-3 KYC was last filed in 2025, the next filing will be due by June 30, 2028.

  • Those DIN holders who have not filed their KYC yet may reactivate their DIN by filing under the existing framework up to March 31, 2026.

Ministry of Labour & Employment has notified the draft rules for 4 Labour Codes

by Pushkar Mer

After implementation of 4 Labour Codes effective from 21st November 2025, the Central Government has *notified the Draft Rules for each 4 Labour Codes on 30th December 2025* for public comments. Stakeholders have been invited to submit objections and suggestions within 45 days (30 days for Industrial Relations Code).
Please click on below link to access these 4 Draft Rules for Code on Wages, Social Security Code, Industrial Relation Code and Safety, Health and Working Condition Code
https://labour.gov.in/en/labour-codes

How to generate RoDTEP Scrips

by Pushkar Mer

The RoDTEP (Remission of Duties and Taxes on Exported Products) scheme is an Indian government initiative launched January 1, 2021, to boost exports by refunding hidden, non-refundable central, state, and local taxes/duties incurred during the manufacturing and distribution of exported goods, making Indian products more globally competitive.

To avail benefits of RoDTEP, the exporter must make a specific declaration in the shipping bill at the time of export. 

To generate e-scrips following easy steps needs to be followed:-

Login to Icegate

Click on eScrip-Credit Ledger

Click on View Complete Details

Scrip generation

Enter port code in search location menu and click on search

Click on check box and then click Create Scrip

Gross Direct Tax Collection increased by 4.16%

by Pushkar Mer

Gross Direct Tax collection for FY 2025-26 (upto 17 December 2025) is Rs 20.02 lakh crore, 4.16% higher than gross collection for corresponding period last year

CBDT has released the following statistics: –

For the period 1 April 2025 till 17 December 2025Amount (Rs.)Remarks
Gross direct tax collectionRs 20.02 lakh crore4.16% higher than gross collection for corresponding period last year
Net direct tax collection (after adjustment of refunds)Rs 17.04 lakh crore8.00% higher than net collection for corresponding period last year
Refunds issuedRs 2.97 lakh crore13.52 % lower than refunds issued for corresponding period last year
Advance TaxRs 7.88 lakh crore4.27% higher than refunds issued for corresponding period last year