As Union Budget 2026 approaches, corporate India is signaling a fundamental shift in priorities. Rather than seeking broad fiscal stimulus or headline tax reductions, industry leaders across sectors are increasingly focused on execution efficiency—specifically addressing approval delays, regulatory overlaps, and policy mismatches that create hidden costs throughout the economy.

Housing Sector Takes Center Stage

The housing sector has emerged as one of the most significant themes in pre-budget discussions, reflecting its substantial multiplier effect on employment, consumption, and infrastructure development. Despite resilient residential demand, particularly in mid-income and premium segments, industry participants highlight persistent policy framework challenges.

Parveen Jain, President of NAREDCO, emphasizes that the absence of full industry and infrastructure status for real estate continues limiting access to long-term capital, even as the sector expands into rental housing and mixed-use developments. Akshay Taneja, CEO of TDI Infrastructure, and Ashish Narain Agarwal, Founder & Managing Director of PropertyPistol, note that affordability-linked incentives lose relevance when policy thresholds fail to reflect actual land, construction, and compliance costs in metropolitan areas.

Tier-2 and Tier-3 Cities Drive Growth

Unlike previous cycles dominated by metropolitan areas, the current housing upcycle is increasingly driven by Tier-2 and Tier-3 cities and peripheral urban corridors. Infrastructure investments in expressways, airports, metro rail, and industrial nodes are reshaping demand patterns across emerging centers including Noida, Gurugram's outer belts, Sonipat, and Hyderabad.

Rohit Kishore, CEO of Hero Realty, highlights how infrastructure projects such as the Noida International Airport and expressway connectivity are driving end-user demand, supported by corporate inflows, data centers, and manufacturing units. Abhay Mishra, President & CEO of Jindal Realty, similarly identifies Tier-II cities as the new growth engine for housing, contingent on sustained urban infrastructure spending.

Manufacturing and MSME Challenges

India's manufacturing sector continues facing significant cost-of-entry barriers, with MSMEs particularly affected by fragmented industrial land availability, duplicated infrastructure, and prolonged approval processes. Yogesh Bhatia, Managing Director & CEO of LML Realty, indicates that reducing factory setup costs by even 15.00–25.00 percent could significantly improve manufacturing viability and formal employment, especially in Tier-2 and Tier-3 cities.

Digital and AI Sector Requirements

As artificial intelligence and data-driven platforms transition from experimentation to core business infrastructure, industry expectations are shifting toward scale-ready policy frameworks. Akshay Chhabra, Chairman & Managing Director of 1Point1 Solutions, and Anand Bhadkamkar, Group CFO of LS Digital, emphasize the need for research and development incentives, data governance clarity, and domestic digital ecosystem support to enable AI-led productivity gains.

In the Global Capability Center space, Lalit Ahuja, Founder & CEO of ANSR, stresses that predictable tax and GST treatment—particularly for cross-border services, intellectual property creation, and R&D activities—remains essential to sustain India's competitiveness as a global capability hub.

Startup Ecosystem Seeks Stability

For startups and investors, the emphasis has shifted firmly toward procedural certainty rather than new scheme proliferation. Rathnakar Samavedam, Investment Director & Managing Partner of Hyderabad Angles Fund, argues that unresolved legacy angel tax disputes and delayed loss recognition continue weighing on investor confidence.

Early-stage founders highlight cash-flow stress from delayed GST input credit and TDS refunds, particularly affecting companies with extended research and development cycles. The startup community is prioritizing resolution of existing procedural bottlenecks over introduction of additional support mechanisms.

Emerging Sectors and Long-term Capacity Building

Beyond traditional sectors, long-term capacity building has gained prominence across education, climate markets, and emerging asset classes. In education, sustained investment in research infrastructure and doctoral funding aligned with NEP 2020 is viewed as critical for positioning India as a global knowledge hub.

Climate markets present unique opportunities, with industry leaders emphasizing the need for robust registries, measurement systems, and digital trust layers as core financial infrastructure to ensure transparency and global acceptance as India transitions to compliance-driven carbon markets.

The consistent message across sectors—from dairy and hospitality to retail technology and luxury housing—reflects a mature approach to policy expectations. Industry is not seeking aggressive fiscal expansion but rather updated policy assumptions, faster execution, and regulatory coherence that reduce hidden costs and unlock long-term capital deployment.

Tax policy experts have presented comprehensive recommendations for Budget 2026 to enhance India's mergers and acquisitions environment, particularly with the Income-tax Act, 2025 scheduled for implementation from April 1, 2026. The suggestions aim to address existing regulatory gaps and improve the ease of doing business for M&A transactions.

Fast-Track Demerger Tax Neutrality

A primary recommendation involves extending tax neutrality to fast-track demergers under Section 233 of the Companies Act, 2013. Currently, the Income-tax Act, 2025 provides tax neutrality only to NCLT-approved demergers under Sections 230 to 232, excluding fast-track demergers that enable small or closely held companies to undertake demergers without court approval.

The finance ministry's rationale for excluding fast-track demergers centers on concerns about potential valuation manipulation without court oversight. However, experts argue this approach contradicts the ease of doing business agenda, forcing genuine taxpayers to choose between transaction efficiency and tax benefits.

Contingent Consideration Clarity

Experts emphasize the need for clear taxation guidelines on earn-out, profit-linked, or contingent consideration arrangements that have become increasingly common in M&A transactions. These arrangements tie part of the sale consideration to achieving specific profitability or financial milestones.

The current legal framework lacks clarity on:

• Taxability of contingent payments
• Timing of taxation for such arrangements
• Treatment of milestone-based considerations

Foreign Company Merger Anomalies

The recommendations address existing inconsistencies in foreign company merger taxation. While foreign companies enjoy capital gains tax exemptions on direct or indirect share transfers during mergers with other foreign companies, shareholders of the amalgamating company face potential capital gains liability on share swaps.

This creates an anomaly compared to domestic mergers, which provide exemptions at both company and shareholder levels.

Capital Gains Tax Rate Concerns

The recent capital gains tax regime rationalization introduced higher long-term capital gains tax rates, which experts suggest adversely impacts investor returns and exit efficiency. The increased rates potentially drive investors toward jurisdictions with more favorable tax regimes.

Key concerns include:

• Reduced post-tax returns for investors
• Decreased competitiveness with other investment destinations
• Impact on foreign capital attraction

Experts recommend reducing capital gains tax rates, suggesting restoration of the earlier 10.00% rate to improve India's competitive position in attracting foreign investment.

Strategic Implementation Timeline

With the Income-tax Act, 2025 set for April 1, 2026 implementation, Budget 2026 represents the final opportunity to incorporate these amendments before the new framework takes effect. The recommendations aim to position India as a preferred destination for cross-border M&A activities while maintaining regulatory integrity and supporting corporate growth objectives.