EY India outlines key expectations from Union Budget 2026

NEW DELHI: With the global economy wobbling and capital turning cautious, EY India believes the Union Budget 2026 has a clear job at hand. Keep growth on track, bring certainty to taxes and nudge private investment back into action.

According to EY, the budget should act less like a spreadsheet and more like a roadmap, one that balances fiscal discipline with bold intent. The idea is simple. Predictable policies attract investors, stable taxes reduce friction and targeted incentives help sectors do the heavy lifting.

EY India national tax leader Sameer Gupta, says the next phase of growth will depend on confidence as much as capital. He points to an expanded production linked incentive scheme as a quick win, especially for future-facing sectors such as artificial intelligence, space and robotics. Public investment in these areas, he adds, can crowd in private money and spark innovation.

Tax certainty, however, remains the big ask. Businesses want fewer surprises and smoother compliance, not rule changes that feel like moving goalposts.

Cleaning up indirect taxes

EY has called for practical tweaks to make customs and indirect taxes less of a maze. A one-time dispute resolution scheme under customs law could unlock revenue stuck in litigation, building on the success of earlier settlement programmes.

Extending the validity of customs advance rulings from three to five years would give businesses breathing room and reduce disputes. Simplifying the customs tariff structure, with sector-wise rationalisation and closer alignment to global rates, could also help Indian goods stay competitive abroad.

Direct taxes need calm and clarity

On direct taxes, EY stresses the importance of a smooth rollout of the New Income Tax Act 2025. Clear guidelines and FAQs, it says, are essential to prevent confusion and avoid a fresh wave of litigation.

The firm also wants a steadier tax regime overall, with fewer rate changes and clearer rules. Rationalising TDS is high on the wish list. With dozens of rates currently in play, disputes and refund delays are common. EY suggests trimming this down to three or four rates and exempting GST-backed B2B payments altogether.

To boost manufacturing, EY has backed the return of accelerated depreciation, without triggering minimum alternate tax. It also wants stronger incentives for job creation, proposing a higher salary threshold for employment-linked benefits.

Making India investor-friendly

For foreign investors, EY underlines the need for clear rules on permanent establishment and profit attribution. Codified guidance would reduce uncertainty and ease cross-border tensions. An optional presumptive tax regime for select foreign service providers could further simplify matters.

Other suggestions include rationalising transfer pricing rules, decriminalising minor tax offences in line with Niti Aayog recommendations and bringing clarity to the taxation of digital assets such as cryptocurrencies and NFTs.

Sector-specific nudges

EY’s wish list also dives into sector-specific reforms. Retailers could benefit from digital customs processes linked to GST systems. Aerospace and defence players may gain from wider tax exemptions on training and ground equipment.

The chemical and life sciences sectors are seeking stronger R and D incentives, while technology and telecom firms want easier access to input tax credits and simpler registrations. Financial services players are pushing for extended tax holidays for IFSC units and better pass-through rules for special situation funds.

The bigger picture

In EY India’s view, budget 2026 has the chance to reinforce India’s growth story without flashy gimmicks. A predictable tax framework, steady public investment and targeted sector support could unlock private capital and keep the economy moving, even as global winds remain uncertain.

In short, less noise, more clarity and a steady hand on the tiller.