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Union Budget 2026: Union Finance Minister Nirmala Sitharaman announced today that a new panel will be constituted to review the impact of emerging technologies like AI on India's service sector.

Union Budget 2026: Union Finance Minister Nirmala Sitharaman announced today that a new panel will be constituted to review the impact of emerging technologies such as Artificial Intelligence (AI) on India's service sector. This move aims to guide the country's rapidly evolving digital economy and formulate policies aligned with future needs.

Strengthening the Link from Education to Employment

In her budget speech, the Finance Minister stated that to fulfill the aspirations of young India, the government will establish a high-powered ‘Education to Employment and Enterprises’ Standing Committee. Considering the service sector as a key driver of economic growth, this committee will provide suggestions to create better synergy between education, skills, and employment.

Budget 2026 on the Path of Reforms

Nirmala Sitharaman clarified that in the Union Budget 2026, the government has chosen the path of reforms over rhetoric. She said that India is continuously moving towards becoming a ‘developed India’ and this momentum will be maintained in the future as well. The proposed committee will prioritize identifying growth opportunities in the service sector.

Industry and Government's Perspective on AI

Before the budget, major tech companies in the country hoped that the government would take concrete steps regarding the development of the AI ​​ecosystem, innovation, and digital infrastructure. Meanwhile, the Economic Survey presented in Parliament on January 29th viewed AI not as a race for prestige, but as an economic strategy. It emphasized a bottom-up model for different sectors, based on open and interoperable systems. Data Centers and Cloud Infrastructure to Receive a Major Boost

In her Budget 2026 speech, Finance Minister Nirmala Sitharaman announced significant tax reforms to strengthen the country's critical digital infrastructure and boost investment in data centers. This includes a proposal to grant a tax holiday until 2047 to foreign companies providing cloud services to Indian users through Indian resellers.

Tax Relief for Global Cloud Companies

This move signals the government's intention to reduce tax-related hurdles for international cloud service providers. It will also encourage local distribution, compliance, and business structures in India, allowing cross-border digital services to adapt to the domestic market.

Safe Harbor Rules for Data Center Services

The Finance Minister also proposed that a 15% safe harbor on costs would apply if a company providing data center services from India is associated with a related entity. This aims to leverage the efficiency of just-in-time logistics in electronic manufacturing.

Support for Component Warehousing and Manufacturing

To further strengthen this ecosystem, the government proposed a safe harbor of 2% profit on invoice value for non-residents storing components in bonded warehouses. This will result in an effective tax burden of approximately 0.7%, which is lower than that of many competing countries and will help accelerate manufacturing in India.

Additionally, a five-year income tax exemption was announced for foreign suppliers providing capital goods, equipment, or tooling to toll manufacturers operating in bonded zones.

Initiatives to Attract Global Talent

To encourage global experts to work in India, the government proposed making the foreign-sourced income of non-resident experts under the notified schemes tax-free for five years. Additionally, it was announced that all non-residents paying taxes under the presumptive tax system would also be exempted from the Minimum Alternative Tax (MAT).