The Finance Act for FY 2026–27 carries fewer headline-grabbing announcements than recent years - but for practitioners, it is the smaller, technical amendments that will shape how corporates close their books, defend assessments, and structure cross-border arrangements over the next twelve months.
This note walks through the changes we believe matter most for finance leaders and audit committees, with a practitioner's view on what to flag before the next quarterly close.
1. Rate structure: stability with a sting in the tail
Headline corporate-tax rates remain unchanged. The 22% concessional rate under section 115BAA continues for domestic companies that have opted in, and the 15% rate under 115BAB remains available for new manufacturing companies whose production began before the sunset date.
The change worth noting is the surcharge restructuring on partnership firms and LLPs above ₹10 crore of total income, which lifts the effective rate by roughly 1.7 percentage points. For owner-managed businesses operating as LLPs, this re-opens the LLP-versus-private-limited conversion question that many had treated as settled.
2. Section 43B(h): the MSME payment trigger keeps biting
Section 43B(h) - introduced two finance years ago - continues to disallow deduction of unpaid dues to micro and small enterprises beyond the statutory MSMED Act timelines (15 days, or 45 days where written agreements exist).
Assessment notices this quarter suggest the department is now mining MCA filings and GSTR-1 data to identify MSME suppliers and cross-check payment cycles. CFOs should ensure the vendor master is tagged with MSME classification, the AP system has 43B(h) flags, and reconciliation of disallowance is documented in the tax computation rather than left as a year-end adjustment.
3. TDS expansion: smaller items, bigger compliance footprint
The TDS net widens further this year. The new provisions reduce the exemption threshold under section 194T for partnership remuneration, and tighten the timelines for furnishing the quarterly TDS statement. The penalty regime under section 234E remains in force.
The redesigned Form 26AS now reflects expanded SFT data - including high-value mutual-fund transactions and credit-card spends. For HNI assessments, this changes the disclosure baseline: returns should be reconciled against Form 26AS and AIS as a discipline, not as an exception.
4. Transfer pricing: safe-harbour thresholds revised upward
The CBDT has raised the turnover thresholds for the safe-harbour regime under Rule 10TD. For IT and ITES captives, the operating-margin benchmarks remain at 17%/18%, but the eligibility ceiling has moved from ₹200 crore to ₹300 crore for the FY-27 returns.
The safe-harbour election is irrevocable for that year. For taxpayers in the ₹150–300 crore turnover band, this is a real planning question - the trade-off is certainty against the possible cost of a higher implicit margin.
5. Tax-loss carry-forward and demergers
The amendment to section 72A is technical but worth flagging. For demergers concluded after the cut-off date, the loss-carryforward rights of the demerged company can now be split in proportion to the assets transferred - rather than remaining with the demerged entity in full.
For groups planning demergers in FY27, this changes the tax architecture of the transaction. Boards should ask whether the proposed scheme of arrangement still preserves the loss benefit they had assumed at the planning stage.
6. What audit committees should ask
Three questions we are recommending audit committees put on the agenda for the Q1 review:
- Are the MSME payment timelines being monitored at AP-system level - and does the tax computation reconcile to the disallowance?
- Are the new TDS thresholds reflected in vendor master configurations and payroll deductions?
- For groups with overseas-related-party transactions, has a fresh safe-harbour analysis been done in light of the revised thresholds?
The bottom line
This Finance Act will not make the front pages. But for practitioners, the cumulative weight of TDS expansion, MSME payment discipline, and transfer-pricing recalibration will mean a busier compliance calendar and a tighter audit cycle. The firms that move early on vendor data, ledger hygiene, and TP documentation will find the year manageable. The ones that wait for the first scrutiny notice will not.
This article is for general information only and does not constitute professional advice. Tax positions are fact-specific and should be reviewed in the context of the relevant statute, CBDT circulars, and judicial precedent. For engagement-specific advice, please write to contact@zarkca.in.