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Budget 2026 expectations: How tax benefits can support new technologies, R&D
This episode of Budget Insights focuses on expectations from Budget 2026 in AI and digital infrastructure, tax certainty and compliance simplification for the technology sector.
In this episode of Budget Insights, a podcast series from EY India Insights, Ravi Mahajan, Partner, Technology, Media & Telecom, EY India, highlights potential priorities and implications for the TMT industry in the forthcoming Budget, including key trends, challenges and opportunities that businesses could find. Tax benefits for new technologies, R&D, start-ups and GCCs are some ways in which Budget 2026 can increase the pace of tech innovation and adoption in India.
Key takeaways
Budget 2026 that could sharpen focus on AI initiatives and create opportunities for larger workforce.
Transfer pricing certainty for GCCs would make it easier for them to opt for safe harbor provisions.
Lowering TDS from 10% could free up companies’ working capital while simpler GST assessment processes would reduce compliance burden.
A tax holiday for new technologies could be based on job creation, investments and export contributions.
My expectation from Budget 2026 would be that the government would also be able to find a way to link AI initiatives to providing opportunities to our vast workforce, which is a great strength in the current environment.
Ravi Mahajan
Partner, Technology, Media & Telecom, EY India
For your convenience, a full text transcript of this podcast is available on the link below:
Ritik Negi
Welcome to Budget Insights, a podcast series from EY India Insights, where we discuss perspectives on key policy developments shaping India’s economic and business landscape.
I’m your host Ritik, and in today’s pre-Budget episode, we explore expectations and priorities ahead of the upcoming Union Budget.
We are pleased to be joined by Ravi Mahajan, Partner, Technology, Media & Telecom, EY India. Ravi is an experienced tax professional advising domestic and multinational companies on tax planning, compliance, treaty interpretation, transfer pricing, and tax controversy matters within the Technology, Media and Telecom (TMT) sector.
Today, he will share his perspectives on the potential priorities and implications for the TMT industry in the forthcoming Budget, including key trends, challenges and opportunities that businesses should be mindful of as policy decisions are shaped.
Ravi, thank you for joining us.
Ravi Mahajan
Thank you for having me join today.
Ritik Negi
Moving on with the first question. How can Budget 2026 accelerate investment in AI, GenAI and digital infrastructure to drive productivity across sectors?
Ravi Mahajan
If we go back to 2025, apart from the geopolitical situation and trade disruption, the one big area that has dominated the world's attention is the rapid progress in AI and related technologies and the large scale global investments that we are seeing in the space. Fortunately, the Indian government had the foresight to identify these developments much earlier and had launched several initiatives in recent years.
We have the India AI Mission, which aims to strengthen the AI ecosystem in India with the focus on democratizing computing access and promoting ethically. And much before that, the government had also started building a strong Digital Public Infrastructure (DPI) backbone, which has transformed several areas in our economy and is also viewed as an aspirational benchmark for the world.
We also have other initiatives such as Scale India and Startup India, which aim to provide multiple opportunities to a younger generation to compete in the global space. We have also built an ecosystem where we are seeing large-scale capital investments now in building data center capacity in India. So, my expectation from Budget 2026 would be that the government would double down on these initiatives and would also find a way to link them to providing opportunities to our vast workforce, which is a great strength in the current environment.
Ritik Negi
That's a great insight. So, what kind of tax certainty and compliance simplification does the technology sector expect to support innovation and scale?
Ravi Mahajan
While there could be several suggestions in this space, I would just pick up a few points. Clear and stable tax regimes enable companies to plan their businesses without concerns regarding certain changes. So, one of the areas could be providing transfer pricing certainty to GCCs, which is an important area in today's environment, by making it easier for them to opt for safe harbor provisions.
We can also reduce the amount of unnecessary money being blocked in working capital for companies in the sector by reducing the TDS rate from 10% to much lower rates. We should also consider providing a simpler GST assessment process by introducing a framework of centralized assessments, which operated smoothly during the service tax regime.
And lastly, including capital goods and input tax credit refund eligibility would also greatly benefit the industry. So, these would be some of my suggestions.
Ritik Negi
Can extending incentive frameworks to frontier technologies like AI, robotics, and space meaningfully catalyze private investment?
Ravi Mahajan
Yes, absolutely. You know, the one thing that we should remember is that in this area, often, the winner takes all or at least most of it. So, it is essential that we enhance our focus in these areas. We can consider introducing a 15% corporate tax rate, which was introduced a couple of years back for the manufacturing sector, or a tax holiday for new technologies with eligibility based on job creation, investments and export contributions.
Another example could be to introduce robust tax incentives for research and development in frontier technologies. By offering tax credits or deductions for companies investing in R&D, the government can lower the financial barriers to innovation, and this would encourage startups as well as established firms to invest in developing new technologies.
Ritik Negi
Thank you, Ravi, for sharing thoughtful perspectives on the Budget outlook for the technology, media and telecom sector. Your insights provide valuable context for our listeners as we anticipate the policy direction and implications of the upcoming Union Budget.
Thank you to our audience for tuning in to the Budget Insights, part of the India Insights podcast. Stay connected with us for post-Budget analysis and commentary on how policy developments may impact industries and tax payers taxpayers across the economy.
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