Union Budget 2026: Union Finance Minister Nirmala Sitharaman today announced that a new panel will be constituted to review the impact of emerging technologies like Artificial Intelligence (AI) on India’s service sector. The purpose of this step is to give the right direction to the rapidly changing digital economy of the country and prepare policies according to the future needs.
Preparation to strengthen the link from education to employment
In his budget speech, the Finance Minister said that to fulfill the aspirations of young India, the government will form a high-powered ‘Education to Employment and Enterprises’ Standing Committee. Considering the service sector as the main basis of economic development, this committee will give such suggestions so that better coordination can be created between education, skills and employment.
Budget 2026 on the path of reforms
Nirmala Sitharaman made it clear that in the Union Budget 2026, the government has chosen the path of reforms instead of rhetoric. He said that India is continuously moving towards becoming a ‘developed India’ and this pace will continue in the coming times also. The proposed committee will identify the possibilities of growth in the service sector on priority basis.
Industry and government’s thinking regarding AI
Before the budget, the country’s big tech companies were hopeful that the government would take concrete steps regarding the development of AI ecosystem, innovation and digital infrastructure. In the economic survey presented in Parliament on January 29, AI was seen as an economic strategy rather than a race for prestige. In this, emphasis has been laid on a bottom-up model for different sectors, based on open and interoperable systems.
Data centers and cloud infrastructure will get a big boost
In the Budget 2026 speech, Finance Minister Nirmala Sitharaman announced important tax reforms to strengthen the country’s critical digital infrastructure and increase investment in data centres. Under this, it has been proposed to give tax holiday till the year 2047 to foreign companies providing cloud services to Indian users through Indian resellers.
Tax relief for global cloud companies
This step of the government indicates reducing tax related obstacles for international cloud service providers. Additionally, it will promote local distribution, compliance and business structure in India, allowing cross-border digital services to adapt to the domestic market.
Safe Harbor Rule for Data Center Services
The Finance Minister also proposed that if a company providing data center services from India is linked to a related entity, then a safe harbor of 15% of the cost will be applicable on it. Its objective is to better utilize the efficiency of just-in-time logistics in electronic manufacturing.
Support for component warehousing and manufacturing
To further strengthen this ecosystem, the government has proposed to provide safe harbor at 2% of profit on invoice value to non-residents storing components in bonded warehouses. With this, the effective tax burden will be around 0.7%, which will be lower than many competing countries and will help in rapidly expanding manufacturing in India.
Apart from this, it was also announced to give five years income tax exemption to foreign suppliers supplying capital goods, equipment or tooling to toll manufacturers operating in bonded zones.
Initiative to attract global talent
To encourage global experts to work in India, the government has proposed to keep the foreign income of non-resident experts covered under notified schemes tax free for five years. Besides, all non-residents paying tax under the estimated tax system were also said to be exempted from Minimum Alternate Tax (MAT).
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