By Mr. Dhruv Chopra, Managing Partner, Dewan PN Chopra & Co. on International Tax — SEP and Encouraging Investor Confidence
Encouraging Investor Confidence
Budget 2026 should be framed to deepen investor confidence by prioritizing predictability, administrative clarity and targeted structural reforms. Given recent portfolio outflows and exchange-rate pressure, the fiscal narrative must emphasise credible multi-year capex commitments, transparent debt trajectories and tax stability measures that reduce policy uncertainty for long-term capital. Practically, we expect the Budget to include: (i) clear statements on tax-policy stability (explicitly limiting ad-hoc rate changes and signaling multi-year tax roadmaps), (ii) administrative measures to speed dispute resolution and reduce retrospective risk, and (iii) regulatory steps to make domestic financial hubs and GIFT City more investment friendly (parity, faster approvals). These levers may be seen as high-value signals than headline rate tinkering; a combination of fiscal discipline + regulatory clarity will have the greatest near-term impact on foreign and strategic long-term allocations.
International Tax — SEP
We expect the Budget to prioritise clarity on the application and limits of Significant Economic Presence (SEP) rather than to broaden its scope. SEP’s statutory insertion has generated uncertainty on thresholds, user definitions and profit attribution—friction that distorts crossborder structuring for digital and remote service models. The government should use the Budget to: (i) issue authoritative clarificatory guidance on SEP’s intended reach (digital/remote transactions with India-user nexus), (ii) clarify interaction with existing business-connection rules and treaty commitments to reduce double-tax risk, and (iii) signal administrative procedures (safe-harbours, simplified compliance) for nonresident taxpayers. Such calibrated clarification would protect the tax base while minimising compliance-driven deterrents for legitimate foreign investment and global capability centres. Given the sustained commentary from international tax specialists, a contained clarificatory approach is the most policy-consistent outcome.
