Pillar Two and India: 2026 Compliance Impact for Multinational Groups

Pillar Two, the OECD’s global minimum tax framework, is no longer a future policy question for companies with India operations; it’s an active compliance requirement with a filing deadline on the calendar this year. This guide focuses specifically on what Pillar Two means in practice for Indian entities and for multinational groups with Indian subsidiaries: where India’s own position currently leaves a real compliance gap, what’s due when, and what finance teams should be doing right now.

A Quick Primer: What Pillar Two Requires

Pillar Two sets a global minimum effective tax rate (ETR) of 15% for multinational enterprise (MNE) groups with consolidated revenue above EUR 750 million, enforced through three coordinated rules: the Income Inclusion Rule (IIR), the Undertaxed Profits Rule (UTPR), and the treaty-based Subject to Tax Rule (STTR). For the full mechanics of how these rules apply and interact, see our detailed explainer on how the GloBE rules operate. The rest of this guide focuses on the part that matters most for businesses in India: what these rules actually mean once an Indian entity is part of the group structure.

Why Pillar Two Matters for Companies Operating in India

The impact splits into two genuinely different situations, and conflating them is the most common mistake groups make when scoping their exposure:

• India-headquartered groups and standalone Indian entities: India’s corporate tax rates range from 15% to 30%, and companies are separately subject to Minimum Alternate Tax at 15% (plus applicable surcharge and cess) on book profits. For most Indian entities, this already sits at or above the 15% GloBE floor, so direct top-up tax exposure on India-sourced profits is limited. The exception worth checking specifically: entities relying heavily on income-based incentives, profit-linked deductions, or exempt income streams, where the calculated GloBE ETR can diverge meaningfully from the statutory rate.
• Foreign-parented groups with Indian subsidiaries: This is where the real, current exposure sits, and it’s the case most relevant to multinationals reading this. If an Indian subsidiary’s GloBE ETR calculation shows a shortfall, and India has no domestic top-up tax of its own to collect it locally, that shortfall is instead collected by the parent’s jurisdiction under the IIR — or, in the parent jurisdiction’s absence of an IIR, by other group jurisdictions under the UTPR. In practical terms: India-sourced profits can end up generating tax revenue for another country, not for India.

The QDMTT Question: India’s Open Compliance Gap

This is the single most important unresolved point for any group with an Indian subsidiary. India has not enacted a Qualified Domestic Minimum Top-up Tax (QDMTT), the mechanism most Inclusive Framework members have used to ensure that top-up tax on their own domestic profits is collected locally rather than ceded to a parent jurisdiction. Until India does, foreign-parented groups should assume that any GloBE shortfall attributable to their Indian subsidiary will be picked up elsewhere in the group structure, typically at the UPE level rather than by India itself.

Two factors are relevant to how this may evolve. First, India has consistently advocated at the OECD policy level for a fairer allocation of taxing rights toward market and developing jurisdictions, a principle that sits at the core of Pillar Two’s design, which suggests India has both the policy rationale and the incentive to eventually introduce its own QDMTT. Second, the OECD’s January 2026 Side-by-Side package, which exempted US-parented groups from the IIR and UTPR, explicitly left QDMTTs untouched, meaning that if India does introduce one, it would apply to US-parented groups’ Indian subsidiaries just as it would to any other group’s, regardless of the parent’s SbS exemption elsewhere. Groups structuring new Indian investment or reviewing existing structures should treat a future Indian QDMTT as a live possibility to plan around, not a remote scenario.

GIR Filing: What India-Based Constituent Entities Need to Prepare

Where a group is in scope of Pillar Two, its Indian constituent entity or entities will typically feed data into the group’s GloBE Information Return (GIR), filed centrally by (or on behalf of) the Ultimate Parent Entity and exchanged with relevant tax authorities. The first GIR filings for calendar-year taxpayers are due by 30 June 2026 in most implementing jurisdictions. For an Indian finance team, this means:

• Confirming which entity in the group is responsible for central GIR filing and what data the Indian entity needs to supply and by when this is frequently later in the process than local teams expect, since group consolidation timelines drive the schedule.
• Mapping India-specific financial statement data against GIR data requirements, which run well beyond what standard statutory financial statements capture, adjusted covered taxes, jurisdictional ETR components, and substance-based income exclusion inputs are common gaps.
• Reviewing whether India-specific tax incentives claimed by the entity (accelerated depreciation, profit-linked deductions, patent box treatment under Section 115BBF, or similar) need separate GloBE-specific treatment distinct from their normal tax return treatment.

Compliance Action Plan for Finance Teams in India

• Confirm group scope first: verify consolidated group revenue against the EUR 750 million threshold across the current and two preceding fiscal years before assuming Pillar Two applies at all.
• Model the India ETR on GloBE terms, not statutory terms: don’t rely on India’s headline tax rates as a proxy; run the actual GloBE ETR calculation, particularly if the entity uses any income-based incentives.
• Identify the parent jurisdiction’s SbS status: if the UPE is US-based, IIR/UTPR exposure at group level is currently exempted under the Side-by-Side Safe Harbour; for any other parent jurisdiction, a shortfall at the Indian entity will typically flow through to IIR or UTPR exposure upstream.
• Start GIR data preparation now, not at year-end: given the volume and specificity of data required, treat this as a current workstream regardless of where your group sits in its own filing timeline.
• Watch for Indian QDMTT developments: a domestic top-up tax would change the compliance picture for every foreign-parented group with an Indian subsidiary and is worth tracking as part of ongoing India tax structuring rather than treating Pillar Two as settled.

How MBG Corporate Services Can Help

Our international tax and transfer pricing teams work with multinational groups to model their India-specific GloBE ETR, assess exposure arising from the current lack of an Indian QDMTT, and prepare the underlying data Indian constituent entities need to supply for GIR filing. Where Pillar Two considerations intersect with broader India entity structuring or incentive planning, our corporate tax services team can advise on the fuller picture.