15.5% Safe Harbour Limit for IT Companies Raised to ₹2,000 Crore 

New Delhi, February 1, 2026: The government has raised the Safe Harbour eligibility limit for IT services companies to ₹2,000 crore and introduced a uniform 15.5% margin. The change was introduced in the presentation of the Union budget and it is expected to streamline compliance with transfer pricing among exporters.  

The measures were announced by Finance Minister Nirmala Sitharaman when she was presenting Budget 2026 in Parliament. The changes are included in a more comprehensive redesigned tax administration at certainty and expediency. 

Higher Threshold Broadens Coverage 

The Safe Harbour eligibility limit has been increased from ₹300 crore to ₹2,000 crore. This widens access to the simplified regime for mid-sized and larger IT service providers.

Earlier, only smaller firms could opt for fixed margins under the framework. Many growing exporters had to undergo detailed transfer pricing studies and scrutiny. 

With the revised cap, more companies may qualify for predetermined margins. This can reduce audits, litigation, and prolonged tax assessments. 

Unified 15.5% Margin For All IT Services 

The Budget has consolidated all IT-related services under a single Safe Harbour category. Software development, IT-enabled services, knowledge process outsourcing, and contract R&D now fall under one bracket. 

These services will follow a uniform margin of around 15.5%. Earlier rules applied different margins based on service type and risk profile. 

A single rate is expected to improve consistency in tax filings. It may also reduce interpretational differences during assessments. 

For companies, this means fewer classification disputes and clearer cost planning. The structure aligns tax treatment with operational realities. 

Automated And Rule-Based Approval Process Introduced 

The regime will now follow an automated, rule-based system for approval. Companies opting for Safe Harbour will not require manual examination by tax officers. 

This shift cuts procedural delays and reduces discretionary oversight. It also provides faster confirmation for eligible applicants. 

Firms operating across multiple jurisdictions may benefit from predictable timelines. The approach supports ease of doing business objectives. 

Background And Sector Impact 

Transfer pricing has been a recurring compliance challenge for India’s IT exporters. Disputes often arose around margins and benchmarking methods. 

Safe Harbour rules were introduced to provide certainty through fixed profitability thresholds. However, the earlier ₹300 crore limit restricted participation. 

The expanded framework addresses this gap and brings more service exporters into the simplified system. Companies may gain better visibility on tax costs while negotiating global contracts. 

Market participants indicate that the changes could lower compliance overheads and reduce litigation risk. The measures are aimed at creating a stable tax environment for service exporters. 

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