AI Takes Centre Stage in Union Budget 2026: High-Powered Committee to Study Job Impact, 25-Crore Capacity Mission

Sanchita Mukherji, Business Economist and Managing Partner, Talk The Walk
The Union Budget 2026 marks an important step in India's capital market evolution. The decision to permit foreign individuals to invest directly in Indian equities reflects a calibrated and forward-looking approach to reform. By enhancing the individual investment limit from 5% to 10% and raising the overall cap from 10% to 24%, the government is widening participation while retaining essential prudential safeguards. This measured liberalisation can strengthen price discovery, deepen shareholding structures, and support long-term capital formation. Equally, sustained regulatory oversight will be critical to preserve market stability and ensure alignment with India's broader economic priorities. Overall, the move signals growing confidence in the resilience, depth, and maturity of India's capital markets.

Yachneet Pushkarna, Chief Seva Officer & CEO, HARIBOL (ISKCON Impact Project)
As an ethical food and wellness brand, we view the Union Budget 2026–27 as a timely opportunity to strengthen India's agriculture and dairy ecosystem. The focus on infrastructure-led growth in Tier-2 and Tier-3 regions, combined with credit-linked support for animal husbandry and Farmer Producer Organisations, can unlock sustainable livelihoods in agri-centric districts where dairy forms the economic backbone. The integration of AI through initiatives like Bharat VISTAAR is critical, as it can enable traceability, accountability, and proof-based transparency across farm-to-dairy value chains. We believe targeted incentives for dairies adopting AI-driven systems and modern processing technologies will accelerate this shift from claims to verifiable data. With the right policy support, India can build a resilient, ethical, and future-ready dairy economy that benefits farmers, animals, and conscious consumers alike.

Ankit Modi, Founding Member & Chief Product Officer, Qure.ai
The ₹10,000 crore allocation under Biopharma Shakti reflects a clear recognition that India's biopharma ambitions will be shaped not only by manufacturing scale, but by the strength of its clinical and regulatory foundations. The plan to create over 1,000 accredited clinical trial sites and strengthen regulatory review is a key step toward improving the quality and credibility of clinical research, especially as biologics and biosimilars become more important in treating diseases such as cancer, diabetes and autoimmune disorders.

The budget also highlights artificial intelligence as a national priority and proposes the creation of five regional medical hubs that integrate care, diagnostics and research. Together, these measures point to a more connected healthcare system where reliable clinical and diagnostic data will be essential.

For Qure.ai, this direction reinforces the need to build diagnostic and data systems that work reliably at scale and support India's credibility in global biopharma research, without adding complexity to already stretched health systems.

Rashmi Chopra, Founder, Rareity Fragrances - Ittar of Bharat
The Union Budget's emphasis on focused sandalwood cultivation is a timely step in preserving India's cultural legacy while strengthening the domestic fragrance value chain. For women-led fragrance brands like ours, access to sustainably cultivated sandalwood not only ensures authenticity and quality but also supports ethical sourcing rooted in tradition. Equally encouraging is the introduction of Self-Help Entrepreneur (SHE) Marts, which will provide women founders with much-needed market visibility and growth opportunities. Together, these measures signal a strong commitment to nurturing heritage-driven industries while empowering women to lead, innovate, and scale businesses with global aspirations.

Dipankar Mukherjee, Co-Founder and CEO of Studio Blo, India's pioneering AI-powered content studio that is redefining brand storytelling through AI-driven cinematic content.
The government is clearly moving in the right direction, and the timing couldn't be better. India is seeing an unprecedented rise of AI-native animation and content studios - moving faster than the US or Europe. But AI must be treated for what it really is: a production workflow, not a replacement for creative intelligence.

While studios are producing content at scale, there's a visible gap in design maturity, storytelling depth, and world-building quality. Technology alone won't close that gap. We need a strong pipeline of human talent trained in film language, animation, and narrative craft.

Education reform must go beyond infrastructure. Cities like Bhubaneshwar, Nashik, Lucknow, Surat etc can become serious talent hubs if pedagogy shifts towards real industry projects, fewer classroom hours, and treating students like professionals. Ethical AI usage also needs to be embedded into India's digital backbone from day one.

Ripul Sharma, Co-Founder, BabyOrgano- an Indian Ayurvedic wellness brand
Union Budget sends a strong signal for Ayurveda-led startups by recognising wellness as both a healthcare and economic opportunity. The announcement of new All India Institutes of Ayurveda and the upgradation of AYUSH pharmacies will strengthen research, standardisation, and credibility across the sector. For consumer brands like BabyOrgano, this focus supports the development of high-quality, export-ready Ayurveda and herbal products while also benefiting farmers engaged in medicinal herb cultivation. Startups operating at the intersection of traditional knowledge and modern supply chains stand to gain from improved infrastructure and policy backing. Going forward, the success of these initiatives will depend on effective execution, quality benchmarks, and market access support. Overall, the budget reinforces confidence in Ayurveda as a scalable, innovation-driven sector for startups contributing to India's wellness and rural economy.

Riddhi Sharma, Founder & CEO, BabyOrgano- an Indian Ayurvedic wellness brand
The Union Budget 2026 reflects a growing recognition of women entrepreneurs as vital contributors to India's startup and MSME ecosystem. Measures focused on inclusive entrepreneurship, improved access to credit, skilling, and market linkages, particularly through self-help and women-led initiatives addressing several long-standing challenges faced by women founders. For consumer and D2C brands like BabyOrgano, initiatives around ease of doing business, digital adoption, and regional development create meaningful opportunities for sustainable scale. The emphasis on startups emerging from Tier-2 and Tier-3 cities is especially encouraging, as many women entrepreneurs from these regions bring strong grassroots insight and resilience. Going forward, effective implementation and timely access to capital will be key to translating policy intent into real impact. Overall, the budget serves as a positive enabler for women-led startups driving responsible and inclusive growth.

Vinesh Menon, Education Policy Expert & CEO, ARISE

"This Budget may not have made dramatic headlines for education, but it sends some important signals for India's young learners. Firsty, the continued emphasis on education, skilling & capacity-building reinforces the government's recognition that India's demographic dividend can only translate into economic strength if learning outcomes and employability improve. The focus on the semiconductor ecosystem highlights the importance of building robust STEM learning and digital literacy from the school level itself. The continued push for digital infrastructure will enable technology-enabled classrooms, teacher capacity building, and wider access to quality education. Importantly, the announcement to establish one girls' hostel in every district addresses access and safety challenges that often limit girls. For college-going youth, the push towards skill-linked education, research, and industry alignment is a step in the right direction.
What this Budget does well is signal continuity — moving education gradually from an input-driven model to an outcomes-oriented one. Measures aimed at decriminalisation and reduction of litigation reflect a move towards a more trust-based regulatory environment, which will help ease administrative pressures snd augurs well if applied on education institutions.

As we look towards a Viksit Bharat, the real success of this Budget will lie not just in allocations, but in execution — ensuring that every child and young adult experiences education that is relevant, supportive, and empowering.

The Union Budget 2026 and the meeting held by the Hon'ble Finance minister with young students thereafter sends a strong signal on strengthening school education as the foundation for India's future workforce. What remains to be seen is how effectively these intentions translate on the ground, especially in areas like student wellbeing, career guidance, and smoother school-to-college-to-work pathways"

Mr. Ghanshyam Dholakia, Founder & Managing Director, Hari Krishna Exports and KISNA Diamond & Gold Jewellery.

“We view the Union Budget 2026–27 as a constructive and growth-oriented step for the gems and jewellery sector, with an emphasis on ease of doing business. The move toward trust-based customs, faster clearances, smoother bonded warehouse movements, removal of the cap on courier exports, and an improved GST refund framework will enhance supply-chain efficiency and unlock working capital across the value chain. Enhanced MSME financing backed by credit guarantees further strengthens liquidity for manufacturers and exporters. The balanced tax treatment of Sovereign Gold Bonds and physical gold also supports a fair and consumer-friendly market. The budget also eases the traveller baggage rules and personal buying of Jewellery. Overall, the Budget meaningfully advances competitiveness, compliance simplicity, and sustainable growth for the industry and end consumers.”

Shashi Mathews, Partner at CMS INDUSLAW

The announcements on Samarth 2.0 to upgrade the textile ecosystem and the proposal for setting up Mega Textile Parks is a welcome move from an international trade perspective as this will help India stifle the competition expected from Vietnam, Bangladesh and China. Combined with the recent India-EU FTA, this will help textile manufacturers and exporters to grow their exports. This will also offset some of the impact coming in because of the US tariffs.

Lokesh Shah, Partner at CMS INDUSLAW

The Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (the NDI Rules) form the cornerstone of India's foreign investment regime, governing the contours of foreign ownership and control of Indian entities. Their significance lies in providing clarity, consolidation, and legal certainty to foreign capital inflows. In a significant policy signal, the Hon'ble Finance Minister has now announced a comprehensive review of the NDI Rules with a view to further augment and potentially liberalise foreign investment in India.

Lokesh Shah, Partner at CMS INDUSLAW

With an objective of easing taxpayer burden and minimising disputes, the Government proposes to merge assessment and penalty proceedings into a common order. Additionally, the mandatory pre-deposit requirement has been significantly reduced from 20% to 10%.

Lokesh Shah, Partner at CMS INDUSLAW

In a significant and much-needed boost for the GCC and IT industry, the Budget proposes to consolidate IT, ITeS and software development services into a single safe harbour category with a uniform margin of 15.5%, while significantly raising the safe harbour turnover threshold from ₹300 crore to ₹2,000 crore. This reform meaningfully widens the scope of safe harbour eligibility, bringing a far larger segment of the industry within a framework of certainty and reduced transfer pricing risk.

Shashi Mathews, Partner at CMS INDUSLAW

The Budget has made significant announcements on Customs tariff rates, processes and procedures aimed at positioning India as an export hub and also to supplement manufacture in India. These include raising the duty-free import limit for processing seafood meant for export, export obligation period for leather items increased to 1 year. Further, import duty has been cut for Li-ion cells used in manufacture of BESS systems, critical minerals, personal use items.

Lokesh Shah, Partner at CMS INDUSLAW

Taxation on buy-back of shares which was recast as dividend income with effect from 1 October 2024, is now proposed to be restructured once again in Budget 2026. The proposal seeks to tax buy-back proceeds as capital gains in the hands of non-promoter shareholders, restoring alignment with taxation principles generally applicable to investments. To avoid misuse or abuse of these provisions, the Government proposes that promoters will be subject to an additional buy-back tax, signalling a differentiated and more targeted approach to tax buy-back.

Shashi Mathews, Partner at CMS INDUSLAW

A very important development has been the announcement of a proposal for SEZ manufacturers who are affected by global trade disruptions by allowing sale to DTAs for a specific period for specified industries at a lower rate.

Abir Lal Dey, Partner at Saraf and Partners

Infrastructure Risk Guarantee Fund: A Strategic Imperative for Legal and Financial Resilience

Finance Minister announced the establishment of an Infrastructure Risk Guarantee Fund, a pivotal initiative designed to alleviate financing constraints and resuscitate delayed projects across India.Modeled on established credit guarantee frameworks for micro, small, and medium enterprises, the fund will furnish partial risk assurances for loans advanced to infrastructure endeavors. This measure directly confronts persistent challenges project deferrals, escalating expenditures, and prohibitive borrowing costs that have impeded capital mobilization in the sector.

The proposal emanates from a committee constituted under the National Bank for Financing Infrastructure and Development (NaBFID), which presented its recommendations to the Finance Ministry.

The National Credit Guarantee Trustee Company (NCGTC) is poised to underwrite developmental uncertainties, thereby enabling banks and financial institutions to extend credit under more favorable conditions. By assuming a defined portion of loan risks for a nominal premium, the fund will diminish lenders' apprehensions, facilitate augmented credit disbursements, and permit expanded portfolio allocations.

While guarantee fees may marginally influence borrowing rates, their net effect on lending economics is anticipated to remain negligible.

This fund represents a transformative instrument for mitigating systemic bottlenecks. India requires approximately $2.2 trillion in infrastructure outlays by 2030 to underpin its $7 trillion economic aspirations. Enhanced legal certainty through standardized guarantee contracts and NaBFID-backed oversight will incentivize public-private partnerships (PPPs), streamline regulatory approvals, and fortify bid processes against claims of undue risk allocation. This could substantially reduce judicial backlogs in high courts and the National Company Law Tribunal, fostering a predictable environment for foreign direct investment.

In essence, the fund transcends mere financial engineering and will be paramount to realizing Vision 2030.

Amit Gupta, Partner at Saraf and Partners

Some taxpayers were expecting a postponement of the New Income Tax 2025 implementation citing the lack of timeline for preparation especially in absence of underlying rules. On this, the FM stated the new Act would come into effect as planned from 1st April 2026. Rules and revamped Forms will be rolled out soon enabling people to prepare in advance.

Adil Ladha, Partner at Saraf and Partners

Tax holiday to a foreign company who provide services to global customers through data centres - upto 2047. They would need to provide services to Indian entities through an Indian reseller entity

Adil Ladha, Partner at Saraf and Partners

Foreign Exchange Management Act (FEMA) / Non-Debt Instruments (NDI) Rules will undergo a comprehensive review. This points to a broader overhaul of how foreign investment flows — particularly equity and portfolio investment rules — are regulated. While a full Budget document is pending formal publication, this signals the government's intent to rationalize the foreign investment framework for greater clarity, simplicity and alignment with global norms.

A comprehensive review of FEMA (NDI) Rules implies, simplification of foreign investment frameworks and could be an opportunity to reduce ambiguities around classification and cap calculations and including clearer definitions of thresholds (e.g., when an investment becomes FDI vs. portfolio equity) and reporting procedures.

This could also lead to potential easing of compliance and monitoring mechanisms for investors.

Adil Ladha, Partner at Saraf and Partners

The limit for an individual foreign investor (PROI) to hold equity in a listed Indian company under the Portfolio Investment Scheme (PIS) is being proposed to rise from 5% to 10% of the paid-up capital.

The aggregate permissible holding of all such overseas individual investors combined is proposed to be increased to 24% of a listed company's equity. Increasing the investment limits for individual overseas investors can attract more foreign capital into Indian equities, especially at a time when foreign portfolio investment has been volatile.

This will also make Indian markets more competitive vis-à-vis other emerging markets by offering easier participation rules to global investors.

Vishal Gada, Founder & CEO at Aurtus

The Union Budget 2026-27 signals a strategic shift toward long-term structural reforms and high-value manufacturing while maintaining strict fiscal discipline with a deficit target of 4.3% of GDP for 2026-27. As expected, there is a marked increase in the public capital expenditure to 12.2 lakh crore and responses to the external geo-political scenario, by giving impetus to electronics component manufacturing, semi-conductor / chips ecology and promoting infrastructure for rare earth minerals.

We now have a clear path for the Income-tax Act 2025 to replace the 1961 Act. We hope the necessary Rules and forms shall be announced in a timely manner. Reduced TCS on overseas remittances (viz. tour packages, medical and educational expense) is a welcome move.

The big tax announcements are tax holidays for foreign companies providing cloud services via India data centres (till 2047), buy back proceeds being once again taxed as capital gains and gift city units' tax holiday extended to 20 years (from the current 10 year period).

Expanded Safe harbour window for IT sector is also a welcome move. Rationalisation of penalty provisions and decriminalisation of various tax offences would go on to create an "ease of business" environment. Lastly, as expected, significant rationalisation made in Customs law.

Ritesh Kanodia, Legal Counsel, Aurtus

"The amendment to the intermediary provision was long overdue. Since its introduction in 2012, it has been the subject of extensive litigation, with authorities frequently questioning export of service transactions. Despite repeated clarifications on what constitutes an "intermediary," notices continued to be issued.This amendment provides a major boost to service exporters and reinforces the principle that taxes should not be exported. However, intermediary services provided by foreign service providers to Indian entities will now be taxable under the Reverse Charge Mechanism (RCM). Since in most cases credit will be available, this should not become a cost in the overall supply chain"

Shreevardhan Sinha