Pillar Two for Indian Groups: International Tax Compliance Without a Domestic Global Minimum Tax

Legal position as at 29 October 2026

India has not enacted an income inclusion rule (IIR), an undertaxed profits rule (UTPR) or a qualified domestic minimum top-up tax (QDMTT) as at 29 October 2026. That does not, however, place Indian groups outside the OECD’s global minimum tax framework (Pillar Two). If an Indian entity belongs to an in-scope multinational group, another jurisdiction may impose top-up tax or require information about the Indian operations, depending on the rules it has implemented and the circumstances of the group.

A GloBE effective tax rate below 15% does not by itself mean that top-up tax will inevitably be payable. The calculation, safe harbours, exclusions, group structure and rules in the relevant jurisdictions all matter. This article explains the principal exposure points and the steps Indian tax and finance teams should consider.

Who is in scope?

The GloBE Rules generally apply to multinational enterprise (MNE) groups with annual consolidated revenue of at least €750 million in at least two of the four fiscal years immediately preceding the fiscal year being tested. The threshold is assessed using the ultimate parent entity’s consolidated financial statements, subject to the detailed GloBE rules and exclusions.

A small Indian subsidiary can therefore be affected if it is part of a qualifying multinational group. Conversely, a large group operating only in India, with no constituent entity or permanent establishment in another jurisdiction, would not ordinarily meet the MNE-group requirement.

Two common situations for Indian tax teams are:

• An Indian-parented group with foreign subsidiaries or permanent establishments.
• An Indian entity that is part of a foreign-parented group.

How foreign rules may reach Indian profits

The GloBE effective tax rate (ETR) is generally calculated separately for each jurisdiction by comparing covered taxes with GloBE income, after the prescribed adjustments. If the Indian jurisdictional ETR is below 15%, a top-up tax may arise. Whether it is payable, and which jurisdiction can collect it, depends on the applicable charging rules and safe harbours.

For an Indian-parented group, a potentially important issue is foreign UTPR exposure on low-taxed Indian profits. But the end of a transitional safe harbour does not itself establish that a UTPR charge will arise. A group must still calculate its GloBE position and test each relevant jurisdiction’s rules and available relief.

Why a 22% Indian tax rate does not guarantee a 15% GloBE ETR

A domestic company that opts for the 22% regime under section 200 of the Income-tax Act, 2025 generally faces an effective domestic rate of about 25.17% after the applicable surcharge and cess. The GloBE ETR is a separate calculation. It uses covered taxes and GloBE income, which starts from financial accounting income and is adjusted under the GloBE Rules. Tax incentives, permanent differences, timing differences and the mix of entities in a jurisdiction can cause the GloBE ETR to differ from the headline domestic rate.

The IFSC regime is a useful illustration. Section 147 provides a 100% deduction for qualifying income of eligible IFSC units, and the Finance Act, 2026 extended the deduction period for eligible units to 20 consecutive tax years out of 25, subject to the relevant statutory terms. Section 200(4) permits a company that has opted into the 22% regime to claim the section 147 deduction for an eligible IFSC unit, provided the conditions are met. Depending on the group’s income, covered taxes and GloBE adjustments, the deduction may contribute to a jurisdictional ETR below 15%.

Simplified illustration only: assume an in-scope group has Indian jurisdictional GloBE income of ₹500 crore and covered taxes of ₹50 crore, producing a GloBE ETR of 10%. Assume further that the substance-based income exclusion (SBIE), based on eligible payroll costs and tangible assets, is ₹100 crore. Ignoring safe harbours and all other GloBE adjustments, the illustrative top-up percentage is 5%, and the amount applied to excess profit is 5% × (₹500 crore − ₹100 crore) = ₹20 crore.

This ₹20 crore is not a prediction of a group’s actual tax liability. A calculation would need to consider all relevant GloBE adjustments, elections, additional current top-up tax, applicable safe harbours, and the rules implemented by the jurisdictions entitled to tax. If a safe harbour applies, the result may be different or no top-up tax may be due under the relevant charging rule.

The 2026 Substance-based Tax Incentive Safe Harbour may provide relief for certain qualified tax incentives linked to expenditure and certain production-based incentives, subject to conditions and caps. It is not a blanket exemption for every tax holiday or profit-based deduction. A group should not assume that the section 147 IFSC deduction qualifies without testing the detailed OECD criteria.

What changed in 2026?

The Side-by-Side package (January 2026)

On 5 January 2026, the OECD/G20 Inclusive Framework released the Side-by-Side package. Its key components include:

• Side-by-Side Safe Harbour: for an MNE group whose ultimate parent is in a jurisdiction recognised as having a Qualified Side-by-Side (SbS) Regime, the safe harbour can treat the group’s IIR and UTPR top-up tax amounts as zero in other jurisdictions. It does not switch off QDMTTs.
• UPE Safe Harbour: for a jurisdiction with a Qualified Ultimate Parent Entity (UPE) Regime, the safe harbour can treat the UTPR top-up tax amount for the UPE jurisdiction as zero, subject to the rules and conditions.
• Simplified ETR Safe Harbour: provides a simplified ETR calculation, generally for fiscal years beginning on or after 1 January 2027, with limited earlier use from 2026, subject to the detailed requirements.
• Substance-based Tax Incentive Safe Harbour: permits certain qualified tax incentives to be treated as an addition to covered taxes within prescribed limits.
• Extension of the Transitional CbCR Safe Harbour: extends the period during which qualifying groups may use the transitional country-by-country reporting tests.

India should not be assumed to qualify for the SbS or UPE safe harbours. The OECD Central Record and the detailed eligibility requirements should be checked at the time of analysis. Recognition under these safe harbours is distinct from whether a jurisdiction has enacted IIR, UTPR or QDMTT legislation. The package leaves QDMTTs unaffected.

The Transitional UTPR Safe Harbour: what its expiry means

The original Transitional UTPR Safe Harbour provides relief for the ultimate parent entity’s (UPE’s) own jurisdiction where that jurisdiction’s statutory corporate income tax rate is at least 20%. For eligible fiscal years, the UTPR top-up tax amount calculated for the UPE jurisdiction is deemed to be zero. The original timing window covers fiscal years of no more than 12 months that begin on or before 31 December 2025 and end before 31 December 2026. OECD guidance issued in May 2026 addresses certain 52- or 53-week fiscal years and extends the relevant end date to 3 January 2027 for the specified cases. The rate test and all other conditions must be checked under the OECD guidance; a 20% headline rate alone is not enough to conclude that a group qualifies.

A conventional Indian April–March fiscal year for FY 2025–26 began before 31 December 2025 and ended on 31 March 2026, so it falls within the original timing window, assuming the other conditions are met. A conventional April–March FY 2026–27 begins after 31 December 2025 and does not qualify for that original transitional safe harbour.

That does not mean that every Indian-parented group will pay UTPR tax for FY 2026–27. The group should determine whether its Indian jurisdictional ETR produces a top-up amount, whether any other GloBE safe harbour applies, and whether and how a UTPR has been implemented in the relevant jurisdictions. The special 52/53-week extension should be applied only where its specific conditions are satisfied.

Revised GloBE Information Return (September 2026)

On 11 September 2026, the OECD released a revised GloBE Information Return (GIR) reflecting the January 2026 Side-by-Side package. The revised version is for GIR filings relating to fiscal years commencing on or after 31 December 2025. For an April–March group, that generally means FY 2026–27 onwards. Groups should confirm which GIR version applies to each reporting fiscal year and check the local filing rules in every relevant jurisdiction.

Filing deadlines

Under the GloBE Model Rules, the GIR and relevant notifications are generally due within 15 months after the end of the reporting fiscal year. The deadline is extended to 18 months for the group’s transition year—the first fiscal year in which it falls within the GloBE Rules—subject to the applicable domestic implementation.

For example, for an April–March group whose first in-scope year was FY 2024–25, ending on 31 March 2025, the model-rules transition-year deadline was 30 September 2026. As at 29 October 2026, that date has passed. If this applies to a group, it should promptly confirm whether the GIR was filed, whether central filing was available, and whether local notifications or other local returns remain outstanding.

In May 2026, the OECD announced a common approach to central filing. Where the GIR is filed on time in a jurisdiction that exchanges the return and the required local notifications are made, other jurisdictions may waive the local GIR filing requirement. This is not a blanket waiver: notification duties, domestic minimum-tax returns and other local compliance obligations may remain. Confirm the mechanism and deadlines under each country’s law.

The Transitional CbCR Safe Harbour, as extended

The Transitional CbCR Safe Harbour can allow an MNE group to treat the top-up tax for a jurisdiction as zero for a fiscal year if the jurisdiction satisfies one of the prescribed tests using a qualified country-by-country report (CbCR). The principal tests are:

• De minimis test: jurisdictional revenue is below €10 million and profit before tax is below €1 million.
• Transitional simplified ETR test: the jurisdictional ETR is at least 15% for fiscal years beginning in 2023 and 2024, 16% for fiscal years beginning in 2025, and 17% for fiscal years beginning in 2026 and 2027.
• Routine profits test: jurisdictional profit before tax does not exceed the substance-based income exclusion.

The January 2026 package extended the transitional safe harbour by one year. It generally covers fiscal years beginning on or before 31 December 2027, provided the relevant fiscal year does not end after 30 June 2029, and subject to the detailed rules. Because the tests rely on qualified CbCR data, groups should reconcile consolidation data, Indian statutory accounts, CbCR and transfer-pricing information before relying on the safe harbour.

Accounting: Ind AS 12

The Companies (Indian Accounting Standards) Second Amendment Rules, 2025 introduced Pillar Two-related changes to Ind AS 12. Where applicable, an entity uses the temporary exception from recognising and disclosing deferred tax assets and liabilities related to Pillar Two income taxes. It must disclose that it has applied the exception and disclose current tax expense or income related to Pillar Two income taxes separately. Where relevant Pillar Two legislation has been enacted or substantively enacted but is not yet in effect, it must disclose known or reasonably estimable information that helps users understand its exposure.

These disclosures are relevant for financial years ending March 2026 onwards where the requirements apply; they are not blanket instructions to every Indian company to quantify a Pillar Two liability. The requirements should be assessed in the context of the reporting entity, the group’s exposure to Pillar Two legislation and the reporting period. Finance teams should coordinate with auditors and group tax teams to determine the appropriate disclosures.

Checklist for Indian groups

• Test consolidated revenue against the €750 million threshold in at least two of the four preceding fiscal years, and document the MNE-group perimeter.
• Map the jurisdictions in which the group has constituent entities or permanent establishments; record the IIR, UTPR and QDMTT rules, effective dates, elections, safe harbours and filing notifications relevant to each.
• Calculate India’s jurisdictional GloBE ETR using covered taxes and GloBE income, including IFSC units and other tax incentives.
• For an Indian-parented group, assess FY 2026–27 UTPR exposure without assuming that loss of the transitional safe harbour automatically creates a tax charge.
• Test the Transitional CbCR Safe Harbour and other available safe harbours jurisdiction by jurisdiction, and retain supporting data.
• Confirm the designated GIR filing entity, local notification requirements, central-filing arrangements and deadlines.
• Reconcile group consolidation figures, Indian statutory accounts, CbCR data and transfer-pricing records.
• Assess the Ind AS 12 disclosures in light of the group’s actual exposure and relevant foreign legislation.

The bottom line

India’s lack of a domestic Pillar Two law means that it does not currently collect a QDMTT on Indian profits under this framework. It does not mean that a foreign top-up tax must always be paid. Where an in-scope group has low-taxed Indian profits, an IIR or UTPR in another jurisdiction may create exposure, but the result depends on the group’s GloBE calculation, applicable safe harbours and exclusions, and the implementing laws of relevant countries.

For Indian-parented groups, FY 2026–27 is generally the first April–March year outside the original Transitional UTPR Safe Harbour. Groups should model potential exposure rather than assume a charge, confirm filing obligations early, and keep the data supporting their GloBE calculations aligned across tax, finance, consolidation and transfer-pricing teams. AskSolique can help users trace the underlying provisions and OECD guidance; decisions for a particular group require a fact-specific analysis.

This article is general information based on OECD guidance and Indian law as at 29 October 2026. It is not advice on any specific group. Pillar Two outcomes depend on each implementing jurisdiction’s law, the group’s data, its elections and the safe harbours available in the relevant year.

Related reading

• What Is GIFT City? IFSC Tax Benefits and Regulatory Framework
• International Tax Planning in India After Tiger Global: GAAR, PPT and POEM
• Tax on International Transactions: What Section 163 of the Income-tax Act, 2025 Covers

Sources and further reading

The sources below should be checked for the version in force at the time of publication. The OECD Central Record is regularly updated; confirm the current qualified status rather than relying on a historical statement.

• OECD: Global Anti-Base Erosion Model Rules (Pillar Two)
• OECD: Side-by-Side package (January 2026)
• OECD: GloBE Information Return (September 2026)
• OECD: Central Record for purposes of the Global Minimum Tax
• OECD: May 2026 guidance on the Transitional UTPR Safe Harbour for 52/53-week fiscal years
• Income-tax Act, 2025: section 200 (22% regime and IFSC unit conditions)
• Income-tax Act, 2025: section 147 (IFSC and offshore banking unit deductions)
• Income Tax Department: FAQs on Budget 2026, section 147 deduction period
• Ind AS 12 Pillar Two amendments: Companies (Indian Accounting Standards) Second Amendment Rules, 2025