IT stocks outperform after government raises safe harbour threshold to ₹2,000 crore in Budget 2026

Shares of information technology were outperforming in Sunday's volatile special budget session. The NIFTY IT index touched an intraday high of 38,699 after hitting an intraday low of 37,297.55 as the government increased the threshold for availing safe harbour for IT services from ₹300 crore to ₹2,000 crore.

Shares of IT companies like Wipro, Persistent Systems, TCS, LTI Mindtree, Infosys and Coforge were trading higher in range of 0.2%-3%. Shares in the midcap IT space like Zensar Technologies, Tata Elxsi, Birlasoft and L&T Technology Services advanced between 1%-4% after the government significantly hiked safe harbour for IT services.

Safe Harbour for IT services refer to transfer pricing rules allowing eligible companies to adopt prescribed profit margins to avoid detailed audits.

"The threshold for availing safe harbour for IT services is being enhanced substantially from ₹300 crore to ₹2,000 crore. Safe harbour for IT services shall be approved by an automated rule-driven process without any need for tax officer to examine and accept the application," Finance Minister Nirmala Sitharaman said while presenting her ninth consecutive Budget.

"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. For IT services companies who want to conclude advance pricing agreement, APA, I propose to fast-track unilateral APA process for IT services and endeavour to conclude it within a period of two years," Sitharaman said.

"The period of two years can be extended by a further period of six months on taxpayer's request. I propose to extend the facility of all the modified returns available to the entity entering APA to its associated entities also," the Finance Minister added.

The Budget also proposed a tax holiday till 2047 for foreign companies that provide cloud services to customers worldwide by using data centres in the country.

The tax holiday will be extended to the entities concerned subject to certain conditions.

In the Union Budget 2026-27 speech, Sitharaman said there is a need to enable critical infrastructure and boost investment in data centres.

"I propose to provide tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India," the minister said.

To avail the tax holiday, companies need to provide services to Indian customers through an Indian reseller entity.

As of 1:11 pm, NIFTY IT index surged 1.3% or 495 points to 38,551, outperforming the NIFTY50 index which was down nearly 1%.