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Tax

Corporate tax, withholding, GST and customs, transfer pricing, international tax, the Income-tax Act 2025 and Budget 2026-27.

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Cover of the IMC brief: Tax

In this guide

In this guide

7 pages.

Corporate tax

Corporate tax for foreign-owned companies

A foreign-owned Indian company can opt for a 25.168% effective rate at any income level. The normal regime, foreign company branches and MAT work differently, and the 15% new-manufacturing regime is closed to new entrants.

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Withholding and gains

Withholding tax and capital gains

Dividends, royalties and fees for technical services paid to a foreign company carry 20% withholding under domestic law before treaty relief. Non-residents pay 12.5% on long-term gains on Indian shares, and buy-backs are now taxed as capital gains.

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GST and customs

GST and customs

Since 22 September 2025 GST has two main rates, 5% and 18%, plus 40% for a few items. Customs relief comes through bonded manufacturing, EPCG, export units and targeted duty exemptions, several of them changed in Budget 2026-27.

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Transfer pricing

Transfer pricing and PE risk

Budget 2026-27 introduced a single 15.5% IT-services safe harbour on cost, raised eligibility to ₹2,000 crore and promised faster APAs. Control over Indian operations remains the main PE risk after Hyatt.

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Income-tax Act 2025

The Income-tax Act 2025

The Income-tax Act 2025 replaced the 1961 Act from 1 April 2026, and tax year 2026-27 is the first year under it. Section numbers have changed, and two 2026 statutes have already amended the new Act.

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International tax

International tax: treaties, PE and cross-border flows

Treaty benefits now turn on substance: the Supreme Court applied GAAR to deny Mauritius relief in Tiger Global and found a fixed-place PE in Hyatt. This page sets out the positions a foreign group should settle before investing, from treaty access and PE to withholding and transfer pricing.

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Budget 2026-27

Budget 2026-27 and the 2026 Act

The Finance Act 2026 (assent 30 March 2026) enacted a data-centre exemption to 2047, a single 15.5% IT safe harbour, a final 14% MAT and a longer IFSC deduction. The amending Act of 17 August 2026 added FII, electronics and offshore-fund measures.

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Updates

Recent changes

All changes
  1. Taxation and Other Laws (Amendment) Act 2026: fund, FII and electronics changesTax · Taxation and Other Laws (Amendment) Act 2026 (No. 21 of 2026)
    medium impact
  2. Income-tax Act 2025 replaces the 1961 Act; buy-backs taxed as capital gainsTax · Finance Act 2026; Budget 2026-27 memorandum
    high impact
  3. high impact
  4. high impact
  5. medium impact

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