Budget 2026-27 announces the launch of India Semiconductor Mission (ISM) 2.0
Budget outlay towards Electronics Components Manufacturing Scheme (ECMS): Rs. 40,000 Cr; New safe harbour provisions for IT/ITeS with higher threshold and competitive margin
Udaipur, Feb 01 2026: Union Finance Minister Smt. Nirmala Sitharaman today presented the Union Budget for the Financial Year (FY) 2026-27.
The Budget announcements included significant initiatives aimed at propelling India's Electronics and Information Technology Sector into a new transformational era of growth. The FM announced the India Semiconductor Mission (ISM) 2.0, which aims to enhance domestic production of semiconductor equipment and materials, fostering resilient supply chains and nurturing a skilled workforce. With a substantial allocation of Rs. 1,000 crores for FY 2026-27, this initiative builds on the accomplishments of ISM 1.0, setting the stage for future advancements.
In a further push to invigorate the electronics landscape, the Electronics Components Manufacturing Scheme (ECMS) announced in April 2025, is set to see its outlay elevated to Rs. 40,000 crores, harnessing existing investment momentum that has already surpassed targets. The IT sector, a pivotal driver of India’s economy, stands to benefit significantly from proposed safe harbour provisions. These include a revised threshold for tax relief raised from Rs. 300 crores to Rs. 2,000 crores, while all IT-related services will be consolidated under an umbrella of Information Technology Services, boasting a competitive safe harbour margin of 15.5 percent.
A notable development is the automation of safe harbour approvals, easing the burden on IT companies and allowing for continuity over five years. Additionally, an expedited process for Advance Pricing Agreements (APAs) aims to streamline compliance for businesses. For foreign companies providing cloud services using Indian data centres, a tax holiday until 2047 is on the table, encouraging global connectivity. This innovative approach promises to cement India’s position as a leader in the global technology arena, igniting hopes for a robust and sustainable digital economy.
A High-Powered 'Education to Employment and Enterprise' Standing Committee has also been proposed to recommend measures that focus on the Services Sector as a core driver of Viksit Bharat. The committee will also assess the impact of emerging technologies, including Al, on jobs and skill requirements and propose measures thereof.
Source: PIB; Budget Document
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