In the Union Budget for 2026–27 fiscal, Finance minister Nirmala Sitharaman made several big announcements relating to the Electronics and Information Technology sector in order to accelerate growth in those industries. In a big effort to attract global data centre investments, the government has proposed a 20-year tax holiday for foreign companies offering cloud services from India.
In her Budget 2026 speech, the Finance minister said this incentive aims to bring in long-term capital and boost India's growing data centre ecosystem. Here are some of the biggest announcements related to technology in the Union Budget 2026:
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India Semiconductor Mission 2.0
The Finance minister has announced launch of India Semiconductor Mission (ISM) 2.0, which involves producing both equipment and materials, creating a full-stack of Indian intellectual property (IP) and establishing secure supply chains for India's semiconductor industry.
The programme will be funded using Rs 1,000 crore during the 2026-27 fiscal to establish industry-driven technology research and training facilities in order to develop highly-skilled workers. The ISM 1.0 provided extensive funding to improve the capabilities of the semiconductor industry in India and ISM 2.0 will build on this success.
Electronics Components Manufacturing Scheme get increased outlay
The Union Budget 2026 proposes an increased outlay of Electronic Components Manufacturing Scheme (ECMS) launched in April 2025 that was originally an outlay of 7,22,919 crore. It is being proposed to increase the total outlay to Rs 40,000 crore to take advantage of ongoing success.
All IT service companies to be classified into one category
In acknowledging India's global leadership in software development services, the 2026 Budget proposes one category of all companies providing IT services, including IT-enabled services, Knowledge Process Outsourcing (KPO) and Contract Research and Development relating to the development of software products.
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Due to the various business segments being inter-related, the Budget has proposed categorising all of these services under one category named, "Information Technology Services". A uniform safe harbour margin of 15.5 per cent will be applicable to all.
New regulations for IT firms under safe harbour provisions
The Union Budget 2026-27 proposes new safe harbour provisions for the information technology sector to support it as one of the primary growth engines of India and to help provide tax certainty. The limit for availing of safe harbour for IT Services has also been raised from Rs 300 crore to Rs 2,000 crore. According to the Finance Minister, Safe Harbour for IT services will be permitted under an automated rule-based process, thus removing the requirement for a tax officer to review and approve the safe harbour application.
Once applied by an IT Services company, the same safe harbour can be continued for a period of 5 years at a stretch at its choice.
Tax holiday till 2047
The Budget 2026-27 has pitched for a long-term (till 2047) tax exemption for offshore companies delivering cloud-based services worldwide by using data centres situated in India for the purpose. Such companies would, however, be required to provide services to Indian customers through locally-based resellers, as well as to obtain a safe-harbour level of 15 per cent (on cost) in the event that they are related parties supplying data centre services in the country.
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Consequently, the measure is likely to attract foreign cloud companies who have opted to run their operations in India via a group entity, thus providing corresponding certainty and operational efficiencies.
Content creator labs
The Budget highlights the Animation, Visual Effects, Gaming and Comics (AVGC) sector of India's new industry, which is expected to need 20 lakh professionals by 2030. The Union Budget includes a proposal to help the India Institute of Creative Technologies in Mumbai with establishing AVGC Content Creator Labs in 15,000 secondary schools and 500 colleges as part of India's Orange economy.
'Bharat-VISTAAR'
The Union Budget comprises Bharat-VISTAAR(a virtual integrated system for accessing agricultural resources)- which is going to be an AI-based multilingual tool to combine all AgriStack portals and ICAR package on agriculture practices in order to improve agricultural productivity and allow farmers to make more informed decisions and reduce risks by having access to personalised advisory support for their farming.
