Budget 2025-26: Companies await clarity on India’s stance on Pillar Two rules

Indian firms are hoping that the Union Budget 2025-26 will clarify the government’s position on the Pillar Two tax regime under which multinational corporations have to pay a minimum global tax of 15% in each jurisdiction where they operate.
 
India is amongst the 140 countries that have signed the OECD’s Global Anti Base Erosion Model Rules for Pillar Two. The objective of the rules is to prevent multinational companies from avoiding tax by shifting their profits to countries that are a low tax jurisdiction. The Pillar Two rules are aimed at multinational companies with a global turnover of over Euros 750 million. The G20 too has backed the implementation of the rules.
 
As many as 30 countries have already implemented the Pillar Two rules in 2024 and another 30 are expected to implement it in 2025. While India has supported the move, previous Budgets have till now not indicated any roadmap for its implementation in the country.

According to sources, many countries including India remain on a wait and watch mode on the implementation of the rules, in the wake of Donald Trump being elected as the US President. Trump in his first term too had not been in favour of the move.  
 
Sources also indicated that the revenue department in the finance ministry is of the view that this may not yield too much revenue for India even if it is fully implemented.
 
Jitendra Jain, Partner, Price Waterhouse & Co LLP noted that Indian multinational enterprises are keenly awaiting clarity on India’s stance regarding Pillar Two/global minimum tax in the Union Budget 2025-26. “While 30 countries have already implemented the global minimum tax in 2024, another 30 are set to do so in 2025. Indian MNEs are actively preparing for compliance in these jurisdictions,” he said, He however, pointed out that given that several low and no-tax countries have already implemented Pillar Two, the revenue gain for India from this measure may be limited.
 
At present, India, China and the US are amongst the key countries that are yet to announce a move towards the Pillar Two tax norms.