India's 2026-27 Budget Implements 15.5% Minimum Profit Floor for Foreign Tech Units, Establishing Definitive Tax Framework

The Union Budget for 2026-27 introduces a landmark tax provision mandating a 15.5% minimum profit threshold for taxing foreign technology units, effectively resolving long-standing ambiguities in the taxation of global capability centers (GCCs). This strategic move establishes a single, unified tax framework for IT services work performed by these entities, marking a significant shift from previous ad-hoc assessments. The policy aims to enhance fiscal predictability and compliance, addressing concerns over transfer pricing and profit attribution that have persisted for years. By setting a clear profit floor, the government seeks to curb tax base erosion while fostering a more transparent operating environment for multinational corporations. This development is poised to impact the operational and financial strategies of foreign tech units, potentially influencing investment decisions and corporate structuring. The formalization of tax rules for GCCs underscores India's commitment to refining its regulatory landscape to balance revenue generation with competitive attractiveness in the global tech sector.