Job creation has emerged as the top priority for the upcoming Budget 2026, according to a comprehensive survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI). The survey, which polled 100 companies, provides crucial insights into industry expectations as Finance Minister Nirmala Sitharaman prepares to present the budget on February 1.

Key Budget Priorities Identified

The FICCI survey reveals a clear hierarchy of priorities that businesses want the government to address in the upcoming budget:

Sectoral Focus Expectations

Respondents have clear expectations about which sectors will receive maximum government attention in Budget 2026. Over half of all survey participants believe infrastructure development will be the primary focus area, reflecting the sector's critical role in economic growth.

Export Support Measures in Demand

With global trade facing significant disruptions, particularly due to tariff regimes initiated by major economies, export support has become a critical concern for Indian businesses. The survey identifies specific measures that companies believe will help ease stress on exporters:

Customs Process Improvements

The survey delves deeper into what improvements in customs processes should entail, with respondents providing specific recommendations:

• Easier regulations: Supported by 90% of respondents
• Lower duties: Backed by 69% of participants
• Greater digitisation: Favored by 59% of companies
• Faster rulings and dispute resolution: Desired by 46% of respondents

These findings reflect the business community's focus on operational efficiency and cost reduction in international trade operations. The emphasis on digitisation and streamlined processes indicates industry recognition of technology's role in improving trade facilitation.

Industry Outlook

The FICCI survey underscores the private sector's expectations for Budget 2026 to address both immediate challenges and long-term growth drivers. The prioritization of job creation reflects ongoing concerns about employment generation, while the focus on infrastructure and manufacturing aligns with broader economic development goals. The significant attention to export support measures highlights the need for policy interventions to maintain India's competitiveness in global markets amid evolving trade dynamics.

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.