Budget 2026 should boost private investment, ensure tax clarity: EY India

EY India says Union Budget 2026 should focus on tax certainty, private investment and sector reforms to support growth amid global uncertainty

With the Union Budget 2026 set to be presented on February 1, EY India has highlighted its importance in setting the direction for India’s economic growth. The Budget should focus on maintaining strong growth momentum, providing tax certainty and encouraging investment across sectors, the firm said in a press release.

 

According to EY India, a "forward-thinking approach" is needed to strengthen investor confidence and encourage greater participation from the private sector.

 

Sameer Gupta, national tax leader at EY India, said, “To stimulate private investments, the existing production-linked incentive (PLI) scheme may be extended to cover new technology sectors such as AI, space and robotics."

 

 

"Additionally, public infrastructure investments in futuristic areas, including AI, GenAI, robotics and space technology, may induce growth of private investment in these sectors...," he added.

Indirect tax reforms to ease business operations

 

EY India has suggested several changes to indirect taxation to make it easier for businesses to operate in India. One key recommendation is a one-time dispute resolution scheme under Customs law to clear long-pending cases. This would be on the lines of the ‘Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019’.

 

It has also proposed extending the validity of Customs Advance Rulings from three years to five years by amending the Customs Act. This would improve tax certainty and reduce disputes, the release said. 

Direct tax changes: Focus on certainty, compliance

 

On direct taxes, EY India said there should be clarity and smooth implementation of the New Income Tax Act, 2025. It has called for detailed guidelines and FAQs to reduce confusion during the shift from the old law and avoid unnecessary litigation. The company has also stressed the need for predictable tax policies, with fewer frequent changes in tax rates.

 

TDS rationalisation is another major demand. With multiple TDS rates currently in place, EY India suggests reducing them to three or four rates to cut disputes and cash flow issues.

Incentives for jobs and global investors

For employment generation, the firm has proposed raising the employee cost limit eligible for incentives from ₹25,000 to ₹1,00,000 per month.

 

On international taxation, EY India has highlighted the need for clear rules on permanent establishment and profit attribution to reduce litigation. It has also supported an optional presumptive tax regime for foreign entities in select sectors, as recommended by NITI Aayog.

Sector-specific expectations

EY India has outlined targeted reforms for key sectors. In retail, it has suggested an online system for amending Bills of Entry and paying customs duty, linked with Goods and Services Tax (GST) returns.

 

For aerospace and defence, extending tax exemptions to training simulators and ground support equipment could boost India’s aviation ecosystem. The chemical sector needs restored research and development (R&D) incentives and stronger green credits to encourage sustainable investments.

 

In technology, media and telecom, allowing Input Tax Credit on essential services and introducing centralised GST registration for large taxpayers could reduce compliance burdens.

Financial services, life sciences

 

EY India has called for extending the tax holiday for International Financial Services Centre (IFSC) units and applying a concessional tax rate once the holiday ends. It has also supported full tax pass-through for Special Situation Funds.

 

In life sciences, extending patent box benefits and raising R&D deductions to 200 per cent would boost innovation and support self-reliance in pharmaceuticals.