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 INCOME | TAX AMOUNT PAYABLE | CONDITIONS |
| No disclosure in tax return | Aggregate 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 above | Aggregate 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-resident | Fee of ₹0.1 million | FMV 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.
Pushkar Mer 