Tech Sector Seeks Budget Boost for R&D; Safe Harbor Changes

29 Jan 2025 , 10:14 AM

In order to build on its achievements and take control of the global tech ecosystem, India’s tech sector is anticipating changes to the safe harbor regulations, increased funding for research and development, particularly in the area of artificial intelligence, and a stronger focus on upskilling in the upcoming budget.

On February 1, Finance Minister Nirmala Sitharaman is scheduled to deliver the Union Budget 2025. “We have asked the government to put the earlier announcement into action by streamlining the transfer pricing assessment processes and making safe harbor regulations more appealing. This will increase the ease of doing business for the Information Technology-Business Process Management (IT-BPM) market and draw in the expansion of global capability centers, according to tech organization Nasscomm.

Safe harbor regulations, which include determining pricing for transactions between connected companies, such as a parent firm and its subsidiary, shield a business from the penalty of underpayment for estimated taxes. Given how frequently corporations and tax agencies dispute transfer pricing, this becomes crucial.

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