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As India readies for Union Budget 2026 against a backdrop of global economic uncertainty, EY India has called for a calibrated fiscal roadmap that prioritises
growth continuity, tax certainty and targeted sector-led investments. The professional services firm said the upcoming Budget will be crucial in reinforcing investor confidence, catalysing private capital and sustaining India’s position as one of the fastest-growing major economies.
According to EY India, Budget 2026 should strike a careful balance between fiscal prudence and ambition, with a strong emphasis on predictability in tax policy and forward-looking public investment. At a time when India is well-placed for further expansion, the Budget must act as a strategic blueprint to deepen domestic capabilities and strengthen global competitiveness.
Private investment and future-ready sectors
EY India expects the government to sharpen its focus on private investment by extending the Production-Linked Incentive (PLI) scheme to new-age technology sectors such as artificial intelligence, space and robotics. Public investments in emerging areas including AI, GenAI, robotics and space technology could act as a catalyst for private sector participation and innovation-led growth.
Sameer Gupta, National Tax Leader, EY India, said targeted incentives for emerging industries will be critical to driving innovation and attracting both domestic and foreign investors. “To stimulate private investments, the existing PLI scheme may be extended to cover new technology sectors such as AI, space and robotics. Public infrastructure investments in futuristic areas may induce growth of private investment in these sectors,” he said, adding that businesses are seeking a strong commitment to tax certainty and simplified compliance.
Indirect tax reforms to ease compliance
On the indirect tax front, EY India has proposed a series of measures aimed at reducing litigation and improving ease of doing business. It has suggested introducing a one-time dispute resolution scheme under Customs law to settle long-pending disputes, similar to the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, which helped unlock revenue stuck in litigation.
The firm has also recommended extending the validity of Customs Advance Rulings from three to five years by amending Section 28J(2) of the Customs Act, 1962. This, it said, would provide greater certainty to businesses and reduce disputes. Simplification of the customs tariff structure through sector-wise rationalisation and alignment with global standards is another key expectation to reduce compliance burden and improve export competitiveness.
Direct tax certainty and smoother transition
EY India expects Budget 2026 to focus on predictability and clarity in direct taxes, particularly with the transition to the New Income Tax Act, 2025. Detailed guidelines and FAQs will be essential to minimise confusion and avoid litigation during the shift from the Income Tax Act, 1961.
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The firm has also flagged the need to rationalise the TDS framework. With 37 different types of resident payments attracting TDS at rates ranging from 0.1% to 30%, disputes over classification and cash flow blockages due to refunds are common. EY India has proposed a roadmap to reduce TDS rates to no more than three or four slabs and exempt B2B payments subject to GST from TDS, as transaction data is already available in Form 26AS and AIS.
Investment, employment and international tax clarity
To boost manufacturing investment, EY India has recommended reintroducing accelerated depreciation within the concessional corporate tax regimes of 22% and 15%, without triggering Minimum Alternate Tax. The firm believes this would support the “Make in India” push, enhance productivity and attract long-term investment.
On employment generation, EY India has suggested increasing the monthly employee cost limit for employment-linked incentives from Rs 25,000 to Rs 1 lakh to encourage companies to create more and higher-quality jobs.
For foreign investors, EY India has stressed the importance of codified rules on permanent establishment and profit attribution to reduce litigation. It has also proposed an optional presumptive tax regime for foreign entities in sectors such as turnkey projects, technical services, digital and e-commerce, consultancy, management and software—an idea earlier recommended by Niti Aayog in its October 2025 report.
Dispute resolution, decriminalisation and digital assets
EY India expects Budget 2026 to announce revised Safe Harbour rules following stakeholder consultations, making them more effective as an alternative dispute resolution mechanism. It has also proposed rationalising transfer pricing provisions by exempting certain foreign companies without a permanent establishment in India from detailed documentation where income is already reported by Indian taxpayers.
The firm has further urged the government to implement Niti Aayog’s recommendations on decriminalising income tax offences to reduce litigation and build trust. These include fully decriminalising 12 offences, partially decriminalising 17 and retaining criminal liability for six offences with proportionate punishment.
Clarity on the taxation of virtual digital assets, including cryptocurrencies and NFTs, is another key expectation. EY India said a clear legal framework, including guidance on treatment of losses, would improve compliance and provide certainty to investors in the digital asset space.
Sector-specific reform agenda
EY India has outlined targeted expectations across sectors. In retail, it has suggested an online module for amending Bills of Entry and paying customs duties, integrated with GST returns to streamline compliance. For aerospace and defence, extending tax exemptions to aviation training simulators and ground support equipment could help build a comprehensive aviation leasing ecosystem.
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In chemicals, reinstating R&D incentives and offering 200% green credits for renewable energy investments could drive innovation and sustainability. The TMT sector could benefit from allowing Input Tax Credit on essential services currently blocked under GST law and introducing centralised registration for large taxpayers. In financial services, EY India has called for extending the income-tax holiday for IFSC units beyond the current 10-year window and taxing them at a concessional 15% rate thereafter, along with full tax pass-through for Special Situation Funds.
For life sciences, extending patent box benefits to all patent-related income and increasing R&D deductions to 200% could strengthen India’s pharma innovation ecosystem.
Overall, EY India expects Union Budget 2026 to reinforce India’s growth narrative through a predictable policy roadmap anchored in tax certainty, targeted reforms and sustained public investment, unlocking private capital and supporting inclusive, long-term growth.
