Sector-specific measures
Budget 2026-27 measures are shown as proposed unless enacted or notified. General corporate tax is covered on the corporate tax page; the tables lower down reproduce the rates for tax year 2026-27.
| Measure | Effective | What it does |
|---|---|---|
| GST of 5% on renewable energy devices | 22 Sep 2025 | GST on renewable energy devices and parts for their manufacture, including solar power generators and devices and wind-operated electricity generators, was cut from 12% to 5% (56th GST Council). |
| Customs relief for storage and solar glass | 2 Feb 2026 | The basic customs duty exemption on capital goods for making lithium-ion cells was extended to cells for battery energy storage systems, and duty on sodium antimonate for solar glass was cut from 7.5% to nil (Budget 2026-27). |
| Nuclear and critical-mineral imports | 2 Feb 2026 | Nil basic customs duty on goods for nuclear power projects of any capacity registered with customs by 30 September 2035. Also announced: an exemption for capital goods used to process critical minerals in India (Budget 2026-27). |
| Biogas and critical-mineral exploration | Finance Act 2026 (enacted); biogas measure announced | Expenditure on prospecting for listed critical minerals is deductible (Schedule XII). Announced: the value of biogas excluded from central excise on biogas-blended CNG. |
| No 15% rate for new projects | Ongoing | The 15% regime for new manufacturing companies is closed to companies starting production after 31 March 2024. New generation and equipment companies typically pay 25.168% effective under the concessional regime (s.200). |
| Easier foreign borrowing for projects | Feb 2026 | RBI’s February 2026 ECB rules allow ECB up to the higher of USD 1 billion outstanding or total borrowings of 300% of net worth, with a 3-year minimum average maturity; the cost ceiling is removed for ECBs of three years or more (RBI notification, 9 Feb 2026). |
GST
The 56th GST Council (3 September 2025) moved GST to two main rates, 5% (merit) and 18% (standard), plus 40% for a select few goods and services, from 22 September 2025. Renewable energy devices and the parts used to make them moved from 12% to 5%. The general position is on the GST and customs page.
Customs
Three Budget 2026-27 customs changes took effect on 2 February 2026: the lithium-ion cell capital goods exemption now covers cells for battery energy storage systems; sodium antimonate for solar glass is duty-free (from 7.5%); and goods for nuclear power projects of any capacity are duty-free provided the project is registered with customs by 30 September 2035. A further exemption for capital goods used to process critical minerals in India was announced.
Income tax
The 15% regime for new manufacturing companies (s.201) is closed to entrants that began production after 31 March 2024, and Budget 2026-27 added no replacement. A new generation or equipment company therefore compares the concessional regime (s.200) at 25.168% effective with the normal regime. The Finance Act 2026 makes expenditure on prospecting for listed critical minerals deductible under Schedule XII.
External commercial borrowings
Project finance from abroad is easier under RBI’s February 2026 ECB rules: borrowing up to the higher of USD 1 billion outstanding or 300% of net worth, a minimum average maturity of three years, and no all-in cost ceiling for ECBs of three years or more.
Corporate tax at a glance, tax year 2026-27
Rates for tax year 2026-27, the first year under the Income-tax Act 2025, which replaced the 1961 Act from 1 April 2026. Effective rates add surcharge and the 4% health and education cess. Treaty rates can be lower where treaty conditions are met. Effective rate = base rate × (1 + surcharge) × 1.04.
| Tax | Rate or rule | Note |
|---|---|---|
| Corporate tax: concessional regime (s.200) | 22% + 10% surcharge + 4% cess = 25.168% effective, whatever the level of income | Optional for any Indian company, including a foreign-owned subsidiary. Most deductions and exemptions are given up; MAT does not apply. |
| Corporate tax: normal regime | 30%, or 25% if turnover in FY2024-25 was up to ₹400 crore. Surcharge 7% on income above ₹1 crore, 12% above ₹10 crore; 4% cess | Top effective rate 34.944% (30% band). Deductions and incentives remain available, but MAT applies. |
| Foreign company: branch or permanent establishment | 35% on income other than special-rate income. Surcharge 2% on income above ₹1 crore, 5% above ₹10 crore; 4% cess | Effective 36.40% (income up to ₹1 crore), 37.128% (₹1–10 crore), 38.22% (above ₹10 crore). |
| Minimum alternate tax (MAT, s.206) | 14% of book profit (was 15%) from tax year 2026-27; a final tax for companies in the old regime, with no new MAT credit | Credit built up to 31 March 2026 is usable only after moving to the new regime, up to 25% of the year’s tax (domestic companies). |
| 15% regime for new manufacturing companies (s.201) | Closed to new entrants: only companies that began manufacturing or production by 31 March 2024 qualify | Budget 2026-27 left corporate tax rates unchanged (only the MAT rate was cut) and added no replacement regime; new manufacturers compare s.200 with the normal regime. |
| Dividends paid to a non-resident parent | 20% withholding under domestic law, plus surcharge and cess | Taxed in the shareholder’s hands. Treaties can reduce withholding on dividends, interest, royalties and technical fees, subject to treaty conditions. |
Withholding, capital gains, buy-backs, GST and transfer pricing
Domestic-law rates for tax year 2026-27, before surcharge and cess unless stated. The applicable treaty may reduce withholding where its conditions are met.
| Tax | Rate or rule | Note |
|---|---|---|
| Royalties and fees for technical services | 20% on payments to a foreign company, plus surcharge and cess | A lower treaty rate may apply, subject to treaty conditions. |
| Capital gains of non-residents: listed shares | Short-term (s.196): 20%. Long-term (s.198): 12.5% on gains above ₹1.25 lakh | Plus surcharge and cess. Treaty exemptions are open to challenge under GAAR (Tiger Global, January 2026). |
| Capital gains of non-residents: unlisted shares | Long-term: 12.5%. Short-term: at the rate for other income, 35% for a foreign company | Plus surcharge and cess; treaty relief subject to treaty conditions. |
| Share buy-backs | Taxed as capital gains in the shareholder’s hands from 1 April 2026, no longer as dividend | Promoters pay an additional tax on buy-backs under s.68 of the Companies Act 2013. It takes long-term gains, and short-term gains on listed shares, to 22% where the promoter is an Indian company and 30% for any other promoter, including a foreign parent (before surcharge and cess). |
| GST (from 22 September 2025) | Two main rates, 5% (merit) and 18% (standard), plus 40% for a select few goods and services | Approved by the 56th GST Council on 3 September 2025. Tobacco products were initially kept on earlier rates and compensation cess. |
| Transfer-pricing safe harbour: IT services | 15.5% operating margin on cost for software, ITeS, KPO and contract R&D, for taxpayers within the ₹2,000 crore eligibility threshold (raised from ₹300 crore) | Budget 2026-27; notified with the 2026 rules. Approval is automated and the option can run for five years. |
Sources for the two tables above: Finance Act 2026 (No. 4 of 2026); Budget 2026-27 speech and memorandum (1 Feb 2026); BDO and RSM on the Finance Act 2026; PIB, 56th GST Council (3 Sep 2025) and safe harbour (1 Feb 2026); CLC Law and Aurtus on the 2026 rules.
Zones
The brief carries no sector-specific SEZ or free-zone page. The zone-type support available to energy investors is the solar park and ultra mega solar power project programme, where land and transmission are provided to developers at park sites (about 3,084 MW commissioned in 2025), and the state industrial parks and SIPCOT land concessions on the state incentives page.
Note: Budget 2026-27 items described as “announced” (the critical-mineral processing exemption and the biogas excise change) had not been shown as notified in the sources as of 1 October 2026. Confirm notification before relying on them.
What to check next
- Classify your equipment against the 5% GST entry for renewable energy devices and their parts, and confirm the rate for any item that falls outside it.
- For a BESS or solar glass plant, confirm the 2 February 2026 customs exemptions cover your specific capital goods and inputs.
- For a nuclear supply contract, note the customs registration deadline of 30 September 2035.
- Model the concessional regime at 25.168% against the normal regime with incentives and MAT at 14%; the 15% rate is not available.
- Size project debt against the February 2026 ECB limits and the three-year minimum maturity; see withholding and capital gains for interest withholding.