Budget 2026: FHRAI seeks tax perks to drive hotel expansion beyond metros

Pre-Budget representations made to finance ministry, tourism ministry

The Federation of Hotel & Restaurant Associations of India (FHRAI) has urged the government to extend income-tax benefits to new hotel projects and expansions in smaller towns and emerging tourist destinations in the upcoming Union Budget 2026.

 

Alongside tax incentives, the association has submitted a set of proposals to the finance ministry, arguing that such measures would spur fresh investment, speed up infrastructure creation, and generate jobs in Tier-II and Tier-III cities. Representatives from the association submitted their proposals to the ministry on Monday. According to sources, industry representatives are scheduled to meet Finance Minister Nirmala Sitharaman on November 20.

 

FHRAI has also reiterated its long-standing demand for infrastructure status for the sector. This, it said, “should be granted for hotels across all categories built at a project cost of ₹10 crore and above, and to convention centres”, to boost the mid-market hotel segment. “Except for a small percentage, hotel projects in India typically have project costs between ₹10 crore and ₹50 crore (excluding land cost),” the body said in its submission, reviewed by Business Standard.

 

It added that infrastructure status should be granted irrespective of a city’s population, saying that the current threshold — a population under 1 million — restricts tourism growth. “According to the 2011 Census, only 53 cities exceed a population of 1 million. Many historically important cities, heritage sites, and newer destinations with high tourism potential have populations below this limit. This clause disadvantages tourism promotion,” it said.

 

The association has also called for simplified licensing norms and approval systems and for single-window clearance at both the Centre and state levels — another long-pending demand. “From inception of a hospitality project to its daily operations, the sector is tangled in a complex web of bureaucratic processes. This needs to be simplified through measures such as single-window clearance, deemed approvals, merging multiple licences, and fixing a minimum five-year validity period,” it said.

 

Licensing requirements in India range from 35 to 100, compared to seven in Singapore, it added.

 

FHRAI has further sought a higher depreciation rate by allowing complete hotels to be treated as plant and machinery — a move it says would support new investment, reinvestment, and timely replacement of assets, helping maintain service and safety standards.

 

The body has also pushed for higher marketing spends to promote tourism. It said the Budget should include special incentives for lesser-known and emerging tourist destinations, backed by dedicated funds for aggressive domestic and international promotional campaigns. It added that seamless air connectivity to all state capitals, Union Territories, and major tourist destinations is essential to ensure steady tourist flow through the year. 

Menu of wishes 

• New incentives to encourage investment, infrastructure creation & employment
• Infrastructure status for all hotels across all categories built at a project cost of ~10 crore and above
• Infrastructure status irrespective of the city's population
• Simplification of licensing norms and approval systems