Tax

The debate is no longer whether anti-abuse rules should apply, but how they should apply. As GAAR and PPT increasingly converge in practice, a harmonised approach grounded in transparency, procedural fairness and legal certainty will be essential for an effective tax framework.

Agentic AI is reshaping tax operations - from ERPs with AI-powered conversational interfaces to agentic tax engines capable of orchestrating increasingly complex tax processes.

• AI can significantly enhance tax research, drafting, anomaly detection, and transaction classification. However, it is not the primary solution for deterministic tax calculations. AI is augmenting tax professionals, not replacing their tax judgment.
• Boardrooms are seeking confidence in AI-enabled tax processes and their ourputs. That confidence comes from AI operating within a controlled framework built on:
  • Human oversight and review – AI may prepare, but it should not approve or file
  • Auditability and traceability of AI outputs – Which agent generated the output, who reviewed it, who approved it, and what changes were made
  • Transparency – Explainable outputs with references to sources and a confidence index
  • Governance framework– Visibility of active agents, high-risk AI use cases, AI-related breaches, and open risks
  • Assurance – Independent testing by business and risk teams covering accuracy, biases, and data security.

As AI adoption accelerates, the focus should not only be on what AI can do, but also on how it is governed.

In June 2026, the Government, through the Ordinance had provided tax exemption on interest and capital gains earned by FPIs from investments in G-securities. One of the reasons for net positive inflows by FPIs in July, is the sustained interest in debt securities, post the said exemption, coupled with regulatory relaxations. The Taxation and Other Laws (Amendment) Bill, 2026 (the Bill) will replace the Ordinance and enact these exemptions.

To provide further ease of doing business and boost predictable taxation, the Bill also introduced several other measures. Most significant is one that streamlines tax holidays for foreign cloud service providers using India-based data centres, by removing the need for separate government notification while requiring prescribed information to be furnished to authorities.

The Bill also proposes a 15 year tax holiday to attract foreign investors in India’s electronics value chain by providing exempting income arising to foreign companies storing electronic components in bonded warehouses for supply to Indian contract manufacturers, subject to reporting conditions. The exemption for foreign suppliers of capital goods is also extended by 10 years. Together, these are welcome measures that aim to make India a leading hub in data centre ecosystem and electronics.

Further in response to persistent representations, conditions for eligible investment funds rationalised, allowing a wider range of offshore fund structures to qualify for India’s safe‑harbour regime, so that managers can relocate/set up in India without creating a business connection for the foreign fund in India. Whilst for IFSC funds few conditions had earlier also been relaxed, the overall relaxation in the conditions certainly merits global funds to explore India as preferred hub for managing offshore fund capital.

July’s GST collections were driven significantly by imports, but the headline number warrants a closer look. The real insight lies in understanding whether growth stemmed from finished goods or productive inputs, and how much was influenced by a weaker rupee inflating import values rather than a genuine rise in volumes and demand.

GST has matured considerably through greater digitisation and transparency, creating a more unified and efficient indirect tax framework. As businesses increasingly adopt digital and AI-enabled solutions, an integrated GST ecosystem with greater automation, streamlined processes and reduced manual intervention will be critical to enhancing taxpayer experience and unlocking the full potential of GST.

• PF continues to be a strong retirement savings vehicle, offering tax advantages, attractive interest rates, and long-term financial security.
• Greater flexibility in contributions does not change the need for disciplined retirement planning.
• Ongoing EPFO digitisation is making claims and withdrawals simpler and faster.
• Employees should understand how compensation structures are evolving and engage with HR teams to make informed decisions aligned to their financial goals.

The new framework offers more flexibility, retirement planning remains a personal choice that requires careful consideration.

The proposed move to a broader definition of wages under the Labour Codes could increase PF contributions for both employers and employees. While this may strengthen long-term savings and tax efficiency, it could also influence monthly take-home pay and prompt a rethink of compensation structures.

Anshul Aggarwal

Partner,  Indirect Tax
KPMG in India    

GST has matured considerably through greater digitisation and transparency, creating a more unified and efficient indirect tax framework. As GST 2.0 evolves, focus areas such as dispute resolution, refund of accumulated credit in inverted duty structure and stronger industry-government consultation will be critical in proactively addressing emerging issues. An integrated GST ecosystem with greater automation, and reduced manual intervention will be key to enhancing taxpayer experience and unlocking the full potential of GST.