Budget 2026 wishlist from the healthcare sector

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• Budget 2025 extends customs duty exemptions on lifesaving drugs to March 2029
• New Income-tax Bill to simplify laws, extend startup tax holidays to 2030
• Pharma sector focuses on innovation, biosimilars, and healthcare infrastructure

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The Indian pharmaceutical and life sciences sector entered FY26 after a reform-oriented Union Budget 2025 that focused on tax simplification, import duty relief on medicines and expansion of healthcare infrastructure.

Since last one year, the Nifty Healthcare index gained 4 percent. Stocks to watch include Laurus Labs, Fortis Healthcare, Glenmark Pharma, Torrent Pharma, Alkem Lab, Divis Lab, Sun Pharma, Apollo Hospitals, Biocon, Zydus Lifescience, Dr Reddy’s Lab and Piramal Pharma.

Union Budget 2025 extended Basic Customs Duty (BCD) exemptions on specified drugs and medicines, including life-saving drugs, until March 31, 2029. The government also expanded BCD exemption to 36 additional lifesaving drugs and applied a 5 per cent concessional duty to six medicines from February 2, 2025. A new Income-tax Bill was announced to simplify tax laws and reduce litigation, along with rationalisation of TDS and TCS provisions and extension of income-tax holidays for eligible startups until March 31, 2030.

Maitri Sheth, Analyst – Pharmaceuticals at Choice Institutional Equities, said the sector is at an inflection point, with growth drivers shifting toward complex, specialty and innovation-led products. “This strategic pivot is likely to define the next phase of expansion as India strengthens its positioning as the ‘Pharmacy of the World’,” she said, adding that globally aligned R&D incentives and time-bound regulatory approvals would be critical for biosimilars, GLP-1 drugs and novel therapies.

Big Trends

The pharmaceutical sector is transitioning from being a cost-efficient generic producer to a strategic pillar of India’s healthcare and economic growth.

Policy focus is shifting toward biotechnology, medical devices, APIs and innovation-driven products such as biosimilars and GLP-1 drugs.

Healthcare infrastructure and domestic R&D are being strengthened through tax certainty, customs duty relief and targeted public investment.

Major Issues / Challenges

Inverted GST duty structures on raw materials, medicines and medical devices impacting margins.

Dependence on imported APIs and vulnerability to global supply chain disruptions.

Compliance costs for pharma SMEs under the revised Schedule M quality norms.

What happened in the last Budget

A new Income-tax Bill was announced to simplify tax laws and reduce litigation.

Extension of income-tax holiday for eligible startups till March 31, 2030.

BCD exemption on specified and lifesaving drugs extended till March 31, 2029, with additional drugs brought under concessional duty.

Expansion of Patient Assistance Programmes with duty-free supply of medicines.

Announcement of 200 Day Care Cancer Centres in FY26 and nationwide rollout over three years.

What Industry Expects from this Budget

Rationalisation of GST and correction of inverted duty structures, along with targeted customs duty relief.

Restoration of weighted R&D deductions and higher fiscal support for complex generics, vaccines and biopharma.

Extension of the PLI scheme for APIs, supported by market intervention and anti-dumping measures.

Higher public healthcare spending to improve access and infrastructure.

Capital subsidies and soft financing for pharma SMEs to meet revised Schedule M compliance.

Ritesh Shah, Joint Managing Director, Anuh Pharma Ltd, said, the pharma industry does not expect major changes in direct or indirect taxes but is seeking “calibrated, sector-specific interventions that enhance competitiveness and sustainability.”

Ajay Garg, Director & CEO, SMC Global Securities said the industry expects higher public health spending, incentives for preventive healthcare, support for domestic medtech manufacturing, and enhanced tax benefits on health insurance to improve affordability and access.