Budget 2026: Semiconductor industry seeks continuity of incentives, faster payouts

From incentive payouts to skills and localisation, the chip industry lays out its Budget asks

• Industry calls for timely incentives and value creation focus in Budget.
• IESA seeks tax relief, extended eligibility for semiconductor, electronics projects
• Calls for export incentives linked to value addition, not just shipment volumes

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India’s semiconductor and electronics manufacturing industry has urged policymakers to ensure timely disbursement of incentives and focus on value creation in the budget for the financial year 2026-27.

The sector’s immediate priority is the continuation of the India Semiconductor Mission (ISM) 2.0 and the Design Linked Incentive (DLI) schemes, India Electronics and Semiconductor Association president Ashok Chandak said.

The body also wants higher budgetary allocation for projects that have already been approved.

“Given the capital-intensive and long-gestation nature of semiconductor fabs and OSAT facilities, timely disbursement of committed incentives is critical,” Chandak said, referring to outsourced semiconductor assembly and test segment. It will help in easing cash-flow pressures during the construction and ramp-up phases, he said.

Finance minister Nirmala Sitharaman is expected to present the budget on February 1.

Tax certainty and capex relief

A major expectation from the budget is relief on the tax and depreciation front to support high investments.

The IESA president also called for modifying the 15 percent concessional manufacturing tax regime to include semiconductor fabs, electronics components and advanced manufacturing units.

Extending the eligibility window by another five years would help align with the timelines of large fabrication projects, many of which span several years from approval to commercial production, Chandak said.

Shift from assembly to value addition

The industry wants the government to shift from concentrating on volume-led manufacturing towards domestic value addition, he said.

Export incentives for electronics and semiconductors, should be linked to the extent of value added in India rather than shipment volumes alone.

“There is also a need to strengthen localisation mandates by linking PLI benefits to higher value addition and the use of Made-in-India components and semiconductors,” Chandak said.

This approach would help deepen India’s supply chains and improve the resilience of the domestic electronics system design and manufacturing (ESDM) ecosystem.

Testing, certification and ecosystem gaps

Beyond incentives, Chandak also flagged bottlenecks coming in the way of scaling up.

The budget should prioritise simplifying testing and certification frameworks by expanding government-supported testing centres and reducing testing and certification fees, particularly for startups and MSMEs.

“Testing infrastructure remains a weak link for many electronics and semiconductor companies, especially those working on advanced components and systems,” he said.

Another key recommendation is the development of integrated semiconductor and electronics parks with plug-and-play infrastructure.

Such parks can significantly reduce project execution timelines by offering ready access to utilities, testing facilities and common infrastructure, he said.

These measures would help transform India’s semiconductor policy ambitions into on-ground capacity and long-term competitiveness, Chandak said.