OPINION | Budget 2026 could redefine India’s trade, tax, and growth strategy

India’s tax regime has been largely neutral.

These are extraordinary times, and instinctively, countries are pivoting towards unprecedented policy measures to boost growth and, more importantly, build resilience to sustain momentum in a fast-evolving global order. The free-trade world order as we have known it appears to be significantly upended, with an emerging trade regime shaped by strategic multi-alignment in foreign policy.

India’s growth outlook

India, as part of the Global South and among the fastest-growing large economies, is well positioned to deliver high growth over the next decade. At the same time, it will increasingly bet on strategic bilateral and multilateral relationships, with policy choices closely aligned to its geopolitical priorities.

Budget a pivotal policy moment

In this context, Budget 2026 represents a hugely significant moment in India’s policy landscape. This year’s budget announcement could serve as a crucial pivot in India’s industrial and trade policy framework, underpinning its geopolitical deftness while sharpening the contours of the domestic growth agenda. A particular emphasis is likely to be placed on boosting urban and rural consumption, with the aim of triggering a virtuous cycle of private and public investment.

From a taxes and duties standpoint, Budget 2026 presents a valuable opportunity for the government to undertake tariff reforms and realignments, and to address structural deficiencies such as inverted duty structures. Doing so would enable businesses to optimally leverage the benefits of bilateral free trade agreements and impending multilateral trade agreements with key partners. In an environment of rising economic nationalism and protectionist tariff regimes globally, this could emerge as one of the most significant takeaways.

Tax certainty and investment confidence

Moreover, with the income tax law due for a reset in April 2026, sweeping structural changes should not be expected in this budget. However, there is scope to refine the legislation slated for implementation, particularly to enable more flexible mergers, acquisitions, and restructuring. This could include resolving persistent issues such as the taxation of contingent payouts, ensuring full tax neutrality for all forms of demergers, and delivering last-mile simplification of the capital gains tax regime by eliminating selective instances of tax rate arbitrage.

The growing incidence of litigation arising from the administration of the General Anti-Avoidance Rules (GAAR) warrants a serious review of their scope and application, before these issues snowball into a major impediment to foreign direct investment inflows. Claims for tax benefits under bilateral tax treaties with certain investment partner countries often face excessive scrutiny, which tends to unsettle even bona fide investors by increasing uncertainty around tax costs for both primary and secondary investments. The issuance of clearer guidelines on the application of these rules would go a long way towards making India’s tax framework more predictable and investor-friendly.

Finally, there is an urgent need for targeted incentives for R&D and investments in new technologies such as AI infrastructure. Historically, India’s tax regime has been largely neutral, with only a handful of fragmented incentives that have done little to encourage large-scale investment in these areas. As AI increasingly influences nearly every sector, Budget 2026 offers a timely opportunity to democratise access to the benefits of this technological revolution by enabling risk capital to flow more freely, supported by a calibrated and purposeful tax incentive framework.

(Sumit Singhania, Partner, Deloitte India.)

Views are personal, and do not represent the stand of this publication.