As India approaches the Union Budget 2026–27, expectations from corporate India are unusually restrained. With GDP growth stabilising around 6–7% and global uncertainties still lingering, businesses are not looking for headline-grabbing announcements.
What they want is certainty, simplicity, and fewer friction points in taxation.
The real test of this Budget will not be new schemes, but whether it quietly fixes issues that continue to drain capital, time, and management bandwidth.
Manufacturing Incentives: Certainty Matters More Than New Benefits
The 15% concessional tax regime for new manufacturing companies under Section 115BAB has played a key role in attracting long-term investment. However, the approaching sunset clause has created hesitation in fresh capex decisions.
Expectation:
An extension of the concessional regime by at least 3–5 years, with possible inclusion of sunrise sectors such as green energy, semiconductors, and advanced manufacturing.
Why it matters:
Manufacturing investments are planned over long horizons. Without policy certainty, businesses defer decisions — directly impacting India’s Make-in-India and PLI ambitions.
Uneven Taxation Across Business Structures
Today, LLPs and partnership firms face a peak tax rate of nearly 30%, while companies enjoy a 22% regime. This disparity often forces tax-driven restructuring rather than business-driven decisions.
What corporate India expects:
A concessional tax framework for LLPs and firms engaged in manufacturing or specified activities, bringing them closer to corporate tax rates.
Strategic takeaway:
Post-Budget, many groups may reassess whether their current legal structure remains optimal from both tax and governance perspectives.
Cross-Border Taxation: Less Litigation, More Predictability
Permanent Establishment (PE) disputes continue to be a major pain point for multinational enterprises operating in India. Attribution of profits to Indian operations often leads to prolonged litigation.
Possible reform direction:
Simplified or presumptive taxation models for foreign entities with limited Indian presence, reducing subjectivity in profit attribution.
Impact:
Clearer rules can significantly improve India’s attractiveness as a destination for global business and shared service operations.
Transfer Pricing: Time for Practical Relief
Transfer pricing remains the single largest contributor to tax disputes in India.
Key expectations include:
- Clearer Associated Enterprise definitions to avoid overlapping interpretations
- Recalibration of Safe Harbour Rules, including:
- Wider transaction coverage
- Relaxed thresholds
- Inclusion of marketing and distribution services
Why this matters:
Effective safe harbour rules can eliminate disputes at the assessment stage itself, saving years of litigation and compliance costs.
IFSC (GIFT City): Closing the Competitiveness Gap
While GIFT IFSC has made progress, tax parity with global financial hubs remains incomplete.
Corporate and fund managers are closely watching for:
- Dividend income exemptions for IFSC units
- Explicit GAAR exemptions for entities with sufficient substance
- Relief from indirect transfer provisions for Category III AIFs
Big picture:
These changes could determine whether IFSC truly emerges as a viable alternative to offshore jurisdictions.
GST Issues That Still Affect Corporate Strategy
Even though GST falls outside the Budget’s formal scope, businesses expect policy alignment.
Two critical areas:
- Input Tax Credit blockages that strain working capital
- Ambiguity in place of supply rules for intermediary services, leading to double taxation and refund delays
Any movement here directly improves cash flow and compliance efficiency.
The Silent Expectation: Fewer Disputes, Faster Resolution
More than rate cuts, corporate India wants a less adversarial tax environment.
Key asks:
- Wider access to advance rulings
- Shift from mechanical penalties to intent-based enforcement
- Time-bound dispute resolution with predictable outcomes
A tax system that rewards compliance instead of penalising interpretation differences will significantly enhance ease of doing business.
What CFOs & Tax Heads Should Do Now
As Budget Day approaches:
- Run impact scenarios for likely changes
- Revisit entity structures and cross-border arrangements
- Ensure transfer pricing and substance documentation is up to date
- Prepare a post-Budget execution roadmap for quick action
Our View
Union Budget 2026–27 is unlikely to be transformational — and that may be its biggest strength.
Incremental reforms, when implemented with clarity and consistency, can deliver far more value than headline announcements. For corporate India, preparedness — not prediction — will define who benefits most from this Budget.
How We Can Help
As Union Budget 2026–27 approaches, timely preparation will be critical for corporates to convert policy changes into strategic advantage. At IPPC GROUP (I.P. Pasricha & Co), we assist CFOs, tax heads, and business leaders in evaluating Budget proposals, assessing their impact on existing structures, and implementing post-Budget strategies across corporate tax, transfer pricing, cross-border transactions, GST, and IFSC operations.
For a customised Budget impact assessment or advisory support, reach out to us at sailfreely(Replace this parenthesis with the @ sign)capasricha.com or visit www.ippcgroup.com.
