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Below the Quote on Union Budget 2026 by Manoj Purohit, Partner - Financial Services Tax, Tax & Regulatory Advisory,  BDO India

"The budget proposals announced today have hit the nail and rolled out measures to keep the momentum rolling for India to become the third-largest economy. Against the backdrop of geopolitical developments and weakening corporate earnings, India’s economy is currently in a tight spot to exhibit resilience to grow at the projected rate of 7.4%.

All three Kartavyas, i.e., to accelerate and sustain economic growth, fulfil aspirations, and build capacity, and Sabka Saath, Sabka Vikas, are backed by a clear agenda to funnel in a balanced and growth-oriented economy.

 On the BFSI front, the government has put across the required focus to keep the sector as the most prominent contributor to the GDP growth target. The formation of a high-level committee to review the banking sector and the restructuring of public sector NBFCs such as Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) will improve operational scale and credit delivery. MSMEs and SMEs are also considered catalysts for growth. Proposals to introduce a dedicated INR 10,000 crore SME Growth Fund and infuse the Self-Reliant India Fund, set up in 2021, with INR 2,000 crore demonstrate the relevance of the said sector. Public capital expenditure allocation of INR 12.2 lakh crore reinforces long-term investment demand and financial sector depth.

From the offshore investor perspective, one of the key proposals to review the current exchange control regime and increase overall limits for persons resident outside India from 10% to 24% in the portfolio investment scheme indicates the seriousness of the government in continuing to attract foreign outbound investment capital. The reduction of TCS rates from 5% to 2% (without limits) on LRS and overseas tours is a welcome move for foreign transactions. Inviting international corporates to set up cloud data centres in India with a tax holiday of 22 years (till 2047) depicts the intention of the government to make India the most competitive technology hub. In order to continue propagating the IFSC GIFT City, the existing tax holiday has been extended from 10 years to 20 years, with a subsequent tax at 15%, which will accelerate the pace of transactions and business being carried out from the IFSC.

On other tax proposals, alignment of buyback tax, clarity on MAT, one-time relaxation for small taxpayers on disclosures of foreign assets, and provisions on one-time immunity have displayed the intention to bring clarity and transparency and reduce compliance burdens. There was anticipation of announcements on rationalising STT, reducing capital gains tax rates, and increasing long-term capital gains exemption limits, which were not factored in.

Overall, the budget proposals are focused on long-term growth-oriented reforms, building India into a self-dependent, financially stable country, imbibing technology with a push for infrastructure development.

The reforms will ensure a deeper governance framework and an aligned regulatory regime across all market participants and investors. Implementation of key reforms will pave the path to a growth-oriented and fundamentally strong, self-reliant economy for India to become the third-largest USD 5 trillion economy by 2027–28."

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