NewsStocksEY India calls for growth continuity, tax certainty and sector-led investments in Budget 2026EY India calls for growth continuity, tax certainty and sector-led investments in Budget 2026
EY India has outlined comprehensive expectations for Union Budget 2026, calling for growth continuity, tax certainty, and sector-led investments amid global economic uncertainty. The firm recommends extending the PLI scheme to AI, space, and robotics sectors, implementing indirect tax reforms including customs dispute resolution schemes, and rationalizing the TDS framework from 37 categories to 3-4 slabs. Additional priorities include reintroducing accelerated depreciation for manufacturing, increasing employment incentive limits to ₹1,00,000 monthly, and establishing clear frameworks for digital asset taxation to support India's position as a fast-growing economy.
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As India prepares for Union Budget 2026 against a backdrop of global economic uncertainty, EY India has called for a calibrated fiscal roadmap that prioritizes growth continuity, tax certainty, and targeted sector-led investments. The professional services firm emphasized that the upcoming Budget will be crucial in reinforcing investor confidence, catalyzing private capital, and sustaining India's position as one of the fastest-growing major economies.
Private Investment and Technology Sector Focus
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. The firm has identified key areas for expansion:
| Sector Focus: | Details |
|---|---|
| Target Sectors: | Artificial Intelligence, Space Technology, Robotics |
| Investment Strategy: | Public investments to catalyze private participation |
| Expected Outcome: | Innovation-led growth and enhanced competitiveness |
Sameer Gupta, National Tax Leader at EY India, highlighted the importance of targeted incentives for emerging industries. "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 stated.
Indirect Tax Reforms and Compliance Simplification
The firm has proposed comprehensive measures to reduce litigation and improve ease of doing business in indirect taxation:
Customs Law Reforms:
- Introduction of a one-time dispute resolution scheme similar to the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019
- Extension of Customs Advance Rulings validity from three to five years through amendment of Section 28J(2) of the Customs Act, 1962
- Sector-wise rationalization of customs tariff structure aligned with global standards
These reforms aim to provide greater certainty to businesses, reduce disputes, and improve export competitiveness while unlocking revenue currently stuck in litigation.
Direct Tax Certainty and Framework Rationalization
EY India has emphasized the need for predictability in direct taxes, particularly during the transition to the New Income Tax Act, 2025. The firm expects detailed guidelines and FAQs to minimize confusion and avoid litigation during the shift from the Income Tax Act, 1961.
TDS Framework Rationalization:
| Current Structure: | Proposed Changes |
|---|---|
| TDS Types: | 37 different categories |
| Rate Range: | 0.10% to 30.00% |
| B2B Payments: | Subject to TDS |
The rationalization aims to address disputes over classification and cash flow blockages due to refunds, as transaction data is already available in Form 26AS and AIS.
Manufacturing and Employment Incentives
To boost manufacturing investment and job creation, EY India has recommended several key measures:
Manufacturing Support:
- Reintroduction of accelerated depreciation within concessional corporate tax regimes of 22.00% and 15.00%
- Implementation without triggering Minimum Alternate Tax
- Support for "Make in India" initiative and productivity enhancement
Employment Generation:
| Parameter: | Current Limit | Proposed Increase |
|---|---|---|
| Monthly Employee Cost: | ₹25,000 | ₹1,00,000 |
| Objective: | Higher-quality job creation | Enhanced employment opportunities |
International Tax and Digital Asset Framework
For foreign investors, EY India has stressed the importance of codified rules on permanent establishment and profit attribution to reduce litigation. The firm has proposed an optional presumptive tax regime for foreign entities in sectors including turnkey projects, technical services, digital and e-commerce, consultancy, management, and software.
Digital Asset Taxation: The firm expects clarity on virtual digital asset taxation, including cryptocurrencies and NFTs, with a comprehensive legal framework covering loss treatment to improve compliance and provide investor certainty.
Sector-Specific Reform Expectations
EY India has outlined targeted recommendations across multiple sectors:
Key Sector Initiatives:
- Retail: Online module for amending Bills of Entry integrated with GST returns
- Aerospace & Defence: Tax exemptions for aviation training simulators and ground support equipment
- Chemicals: Reinstatement of R&D incentives and 200.00% green credits for renewable energy investments
- Financial Services: Extension of income-tax holiday for IFSC units beyond 10 years with 15.00% concessional rate thereafter
- Life Sciences: Patent box benefits extension and 200.00% R&D deductions
The firm also expects implementation of Niti Aayog's recommendations on decriminalizing income tax offences, including full decriminalization of 12 offences and partial decriminalization of 17 others. EY India anticipates that Budget 2026 will reinforce India's growth narrative through a predictable policy roadmap anchored in tax certainty, targeted reforms, and sustained public investment to unlock private capital and support inclusive, long-term growth.
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