Union Budget 2026 Propels India as a Global Financial Hub
Union Budget 2026 is set to transform India into a stable, scalable, and globally competitive financial ecosystem. This strategic move encourages global financial institutions to view India not just as a growth market but as a strategic base for delivery, innovation, and risk-managed expansion.
Key Tax Reforms for Investor Confidence
A major driver of investor confidence in Budget 2026 is the simplification and predictability brought by targeted tax provisions and reforms. These changes significantly reduce administrative overhead for businesses operating in India.
One of the most impactful announcements is the sharpening of India’s transfer pricing and tax certainty framework, particularly for technology and service-led operations. This is directly relevant for global companies running Global Capability Centers (GCCs) in India.
Expanded Safe Harbour Regime for IT Services
The Budget proposes a significantly expanded Safe Harbour regime for IT services. Key features include a uniform safe harbour margin of 15.5% and an enhanced threshold that rises from ₹300 crore to ₹2,000 crore.
Previously, differences between KPO, BPO, and other services often led to classification issues, especially for diversified and larger GCCs. The new single margin better reflects how modern GCCs operate today, with integrated technology, analytics, and business functions.
This expansion brings a much larger share of mid-sized and large GCCs within the Safe Harbour framework, while also reducing uncertainty for smaller centres that are scaling up. At this scale, the threshold covers GCCs with headcounts of up to approximately 6,000-8,000 employees.
This change brings around 80% of financial services GCCs within the framework, with the remaining 20% covered by Advance Pricing Agreements (APAs). The timeline for APAs has been reduced to two years, providing quicker tax clarity.
Faster Advance Pricing Agreements
Advance Pricing Agreements help companies agree in advance on how their cross-border transactions between GCCs and headquarters will be taxed, reducing the risk of future disputes. Earlier, this process could take several years, creating uncertainty for global firms operating GCCs in India.
The faster two-year timeline provides quicker tax clarity, making it easier for companies to plan investments, expand teams, and move higher-value work to India with greater confidence.
Consolidation of Service Segments
Budget 2026 also proposes consolidating multiple service segments under a single category. This includes IT services, IT-enabled services, knowledge process outsourcing, and contract R&D.
For GCC-heavy global firms—many of whom support core banking platforms, digital channels, analytics, cybersecurity, operations, and finance processes from India—this is a material development. It provides a predictable operating model for multi-year planning.
Targeted Fiscal Incentives for Tier-2 Cities
Beyond taxation, the Budget introduces targeted fiscal incentives and skilling grants for Tier-2 cities such as Kochi, Indore, and Coimbatore. These measures aim to ease the pressure on metro cities while enabling GCCs to access new talent pools.
This supports balanced regional growth, as currently financial services GCCs have a scanty presence in non-metro areas.
Strategic Impact on Global Financial Services
For global financial services firms, the strategic impact of these reforms is larger than transfer pricing alone. This framework supports a shift from India being viewed merely as a cost-efficient offshore center to being recognised as a stable, long-term delivery hub.
In practical terms, it enables leadership teams to make bolder commitments on headcount growth, product engineering expansion, and investments in data platforms and AI delivery from India, without the same degree of annual pricing and audit volatility.
The option to continue safe harbour treatment for multiple years further strengthens the case for long-horizon operating models and long-term investments.
Broader Posture on Foreign Investment
Budget 2026 also strengthens India’s attractiveness through its broader posture on foreign investment and cross-border financial integration. Global firms tend to favour jurisdictions that combine growth with operational stability, and where the policy environment supports both local business development and global connectivity.
This benefits international banks, insurers, asset managers, and fintechs in evaluating India as a key node in their global growth strategy.
External Tailwinds and Reinforcing Cycle
A further tailwind for global financial services investment and GCC scaling in India could come from the reported reduction of US tariffs to approximately 18%. This may improve the overall outlook for cross-border trade flows and global supply chains.
When combined with Budget 2026’s safe harbour framework that enhances transfer pricing certainty for IT services, this creates a reinforcing cycle. Higher global business activity drives greater financial services servicing needs, while India’s improved regulatory and tax predictability strengthens the case for locating long-term capability build and critical delivery functions in India.
Radhika Saigal is FS Consulting Leader and Manoj Marwah is FS GCC Consulting Leader at EY India.
